Economic team raises debt program for 2018
The national government is on its way to exceeding its outstanding debt program for this year, breaching the seven trillion level, on the back of the Duterte administration’s ambitious infrastructure plan and stronger US dollar.
Data from the Development Budget Coordination Committee (DBCC) showed that the inter-agency body expects the government’s total debt stock could reach R7.416 trillion this year, or six percent more than the R6.994 trillion target.
Under the 2018 Budget of Expenditures and Sources of Financing (BESF), Congress approved that local debt would amount R4.652 trillion this year, but the DBCC assessed the government could overshoot that ceiling by 2.7 percent to R4.782 trillion.
As of end-May this year, the government debt obligations in the domestic market already stood at R4.424 trillion, just R228 billion shy of surpassing this year’s Congress-sanctioned target, based on data from the Bureau of the Treasury.
The Duterte administration’s economic managers also adjusted upward its target for the debt in the offshore markets.
DBCC data obtained by Manila Bulletin indicated that the government could end 2018 with total foreign debt of R2.634 trillion, also higher by 12 percent compared with the target of R2.342 trillion under the BESF.
The double-digit upward adjustment in foreign-denominated debt is attributable to the depreciation of the local currency.
The DBCC originally set the peso would average R51 to the US dollar this year, but the actual exchange rate is now at the R53 level.
At end-May, the government’s outstanding foreign debt was at R2.408 trillion, already exceeding this year’s original target by R66 billion.
Total debt obligations in the local and foreign markets stood at R6.833 trillion.
The DBCC’s new debt program is equivalent to 42.2 percent of the country’s economy, as measured by the country’s gross domestic product, or slightly higher compared with 42.1 percent actual ratio registered in 2017.
President Rodrigo R. Duterte’s economic team has committed to mobilize up to R8 trillion during their administration to underwrite the government’s ambitious infrastructure buildup program.
Finance Secretary Carlos G. Dominguez III said he is confident the economy will grow by at least seven percent over the medium term on the back of the government’s “golden age of infrastructure” under the “Build, Build, Build” program.
Last month, the Treasury bureau said the government’s debt increased in May amid the weakening local currency and higher borrowing from the local financial market.
Of the total stock as of May, 64.75 percent was borrowed domestically, while the remaining 35.25 percent was sourced from the external debt markets.