PH debt stock hit new high in May

With more foreign loans and domestic borrowings contracted in May to finance the country’s fight against COVID-19, the national government’s outstanding debt stock further climbed to a fresh high of P8.89 trillion.

In a report on Tuesday, the

Bureau of the Treasury said total outstanding obligations at end-may rose 3.4 percent from P8.6 trillion a month ago and went up by a faster 12.3 percent from P7.9 trillion a year ago.

The Treasury attributed the month-on-month increase in debt to “increased reliance on government securities issuance and external loans to fund COVID-19 response amid a sharp drop in revenue collections.”

At the end of the first five months, cumulative tax and nontax revenues slid 16.1 percent year-on-year to P1.1 trillion.

The end-may domestic debt of P6.03 trillion, which accounted for 68 percent of total, rose 0.9 percent from P5.9 trillion a month ago as the Treasury sold more T-bills and bonds.

Foreign debt as of May reached P2.9 trillion, up 4.4 percent from P2.7 trillion in April as “net availment of external loans amounted to P114 billion as part of continued government efforts to secure financing for the

COVID-19 response while local currency depreciation added P7.65 billion to the peso value of external obligations.”

The Treasury noted that the peso weakened against the US dollar to 50.585:$1 in May from 50.444 against the greenback in April.

In May, the Cabinet-level Development Budget Coordination Committee projected the debt-to-gross domestic product (GDP) ratio to reach 49.8 percent by the end of the year, equivalent to a record P9.6 trillion in debt, before further rising to 51.5 percent in 2021 and 52.3 percent in 2022.

The last time the Philippines had a debt-to-gdp ratio above 50 percent was in 2010 when it hit 50.2 percent.

Prior to the COVID-19 crisis, this debt ratio reflecting a country’s ability to pay its obligations had been on a downward path and fell to a low of 39.6 percent in 2019.

Department of Finance officials had nonetheless said that local debt would account for about three-fourths of yearly borrowings to temper foreign exchange risks.

Alvin Ang, Ateneo Center for Economic Research and Development director, told an online forum last month that “the Philippines had really not borrowed [much offshore] in the last 10 years, and even if we borrow right now … [the government] has the capacity to absorb some more loans,” citing that external debt as a share of GDP was just 23.5 percent in 2018.