Debt soars to new record at nearly P11T until April

Year-on-year, April’s borrowings were 27.8 percent higher than the P8.6 trillion recorded in the same month last year

The country’s outstanding loans reached a new high in April, registering at P10.99 trillion, or two percent higher from last month, pushed by increased domestic and external borrowings, data from the Bureau of Treasury (BTr) showed.

Year-on-year, April’s borrowings were 27.8 percent higher than the P8.6 trillion recorded in the same month last year. The bulk, or 71.1 percent of the overall stock, was from domestic debt, while the remaining 28.9 percent were sourced externally.

Michael Ricafort, the chief economist at the Rizal Commercial Banking Corp. commented, “The latest rise in the national government debt largely reflects the increase in foreign borrowings by the national government recently, such as the EUR2.1 billion ($2.5 billion) euro-denominated bond sale and the JPY55 billion ($505 million) Samurai bond sale.”

He said the national government’s (NG) appetite for borrowing additional funds is fueled by “the continued budget deficits on a monthly basis, though narrower recently, but nevertheless still reflected the need for more government borrowings/debt to finance the said budget deficits.”

The Philippines fiscal balance logged a narrower deficit of P44.4 billion, with the Treasury recovering from an increase in tax revenue collections last month. However, Ricafort said he expects the NG’s debt to increase further to finance the vaccine rollout against the Covid-19 pandemic.

Ricafort said, “The need to finance the purchase of more Covid-19 vaccines would also lead to some pick up in government borrowings/debt; as the commercial purchases for Covid-19 vaccines would be recurring in nature in the foreseeable future.”

According to the BTr, local borrowings reached P7.81 trillion in April, or 0.9 percent higher than the P7.74 trillion figures in March, primarily due to the net issuance of government securities.

Foreign debt expanded by 4.9 percent to P3.17 trillion from P3.02 trillion the prior month, owing to the issuance of global bonds that raised P146.16 billion. But the bureau noted the P10.91 billion increase from the impact of third-currency appreciation against the dollar was tempered by the P24.21 billion appreciation of the peso.

The local unit appreciated from 48.54 as of end-March 2021 to 48.15 against the greenback as of end-April 2021.

“Local-currency exchange rate fluctuations further lowered the peso value of external guaranteed debt by P1.57 billion while third currency appreciation added P1.33 billion to the peso value of guarantees,” the Treasury said.

But Ricafort said the Philippines’ economy remains stable.

“The country’s debt-to-GDP ratio (is) still expected to be within the acceptable international threshold of 60 percent of GDP, especially if GDP continues to recover in the coming months/years, thereby giving the government greater leeway to increase spending, budget deficits, and overall debt to pump-prime the economy,” Ricafort explained.

To recall, the state’s top economic managers said that the country’s robust dollar reserves are sufficient to shield the nation from external shocks and provide enough buffer to manage foreign debt.