PH debt ballooned to record P15.69T as of end-July 2024 — Treasury

The Philippines’ sovereign debt has ballooned further to a new record-high as of end-July 2024 as the government continues its borrowing efforts to augment its budgetary requirements, data released by the Bureau of the Treasury (BTr) on Tuesday showed.

The Philippines’ sovereign debt ballooned to a new record-high of P15.689 trillion as of end-July 2024, data released by the Bureau of the Treasury showed. | via @Ted_Cordero pic.twitter.com/xTNIDlTfSp

— GMA Integrated News (@gmanews) September 3, 2024

As of end-July this year, the national government saw its total outstanding debt at P15.689 trillion, up 1.3% from P15.483 trillion as of end-June 2024.

The P206.49-billion month-on-month growth in the country’s debt stock was “primarily driven by the net issuance of both domestic and external debt,” according to the Treasury.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the fresh record running debt balance “is consistent with the wider budget deficits in recent months that have to be financed.”

Treasury data also showed that the year-to-date fiscal deficit of the national government stood at P642.8 billion as of end-July 2024, up 7.21% year-on-year.

Ricafort said the persistent higher inflation which bloated the government’s expenditures, as well as higher interest rates and the relatively weaker peso exchange rate since 2022 which increased debt servicing have “increased the need to borrow by the national government, leading to higher government debt.”

The bulk or majority of the sovereign debt at 68.54% was sourced locally, while the remaining 31.46% was sourced externally.

The government’s domestic debt, in particular, stood at P10.753 trillion during the period, up 1.7% from P10.573 billion as of end-June 2024.

“The rise in domestic debt was mainly due to the P180.52 billion net issuance of government securities, although partially tempered by the P490-million downward revaluation effect of peso appreciation1 on US dollar-denominated domestic securities,” the BTr said.

Relative to the end-December 2023 level, the Treasury said the country’s domestic debt grew by P735.22 billion or 7.3%.

Meanwhile, the government’s foreign debt reached P4.936 trillion as of end-July 2024, up 0.5% or P26.45 billion higher month-on-month.

“The rise in external debt can be attributed to the net availments of project loans of P5.25 billion and third-currency upward revaluation of P35.44 billion, albeit partially attenuated by the P14.23 billion impact of peso appreciation against the US dollar,” the Treasury said.

Since the start of the year, the Philippines’ external debt  rose by P338.50 billion or 7.4% from its end-December 2023 level of P4.598 trillion.

Finance Secretary Ralph Recto had earlier said the country’s sovereign debt could balloon to as much as P20 trillion by the end of President Ferdinand Marcos Jr.’s term in 2028.

The Finance chief, nonetheless, said that while the nominal debt continues to rise, the country’s economic growth would outpace the increase in debts.

Recto had said that the Philippine economy could reach a value of P37 trillion by 2028, versus a projected debt stock of P20 trillion.

As of the first half of 2024, the country’s debt-to-gross domestic product (GDP) ratio stood at 60.9%, down from 61% as of end-June 2024.

Debt-to-GDP ratio measures the amount of the national government’s outstanding debt proportionate to the value of the economy during a specific period.

A lower debt-to-GDP ratio indicates that the country can pay off its debt without having adverse impacts on the economy.

“For as long as the national government debt-to-GDP ratio would be close or even reduced to below the international threshold of 60% of GDP, this would help sustain the country’s favorable credit ratings at 1-3 notches above the minimum investment grade and fundamentally help sustain the country’s fiscal management and overall debt management over the long-term and for the coming generations,” Ricafort said.

Due to the aggressive borrowing spree to fund response, relief, and cash aid efforts amid the COVID-19 pandemic, the country’s debt-to-GDP grew to 60.5% in 2021, higher than the 54.6% level in 2020.

Prior to the COVID-19 pandemic, the Philippines’ debt-to-GDP ratio reached a record low of 39.6% in 2019. — RSJ, GMA Integrated News