Gov’t debt tops R6-trillion mark in September

The national government’s debt breached the R6 trillion mark in September this year after the peso weakened against the US dollar, data from the Bureau of the Treasury revealed over the weekend.

According to the Treasury report, the government’s outstanding debt from local and offshore lenders stood at R6.086 trillion as of September, up by 2.5 percent compared with R5.935 trillion in the same month last year.

Likewise, the debt rose by 1.8 percent from R5.98 trillion in the previous month.

The Treasury attributed the increase to “foreign currency revaluation” after the peso depreciated to R48.48 against the greenback during the month from R46.95 in the previous year.

Data from the Treasury showed that the government’s foreign debts accounted for about 36 percent of its total outstanding obligation, while the remaining balance of 64 percent are in peso denomination.

In September, the government’s external obligations jumped 6.3 percent to R2.096 trillion from R2.052 trillion a year earlier. Month-on-month, it also rose by 5.4 percent from R2.096 trillion.

“The month-on-month change was attributed to the depreciation of peso against US dollar and third currencies that raised the peso value of US dollar and third-currency denominated indebtedness by R86.91 billion and R2.39 billion, respectively,” the Treasury said.

The Philippine peso has weakened by more than four percent last September.

According to Fitch Group’s BMI research, the softening of the local currency was due to market uncertainty regarding President Rodrigo R. Duterte’s policy trajectory, as well as the run up to the US presidential election that raised concerns about geopolitical stability in the region.

Fitch now expects the peso may head towards support at P50 against the US dollar in the next three to six months.

The Department of Finance has already assured investors that the Duterte administration is focused on inclusive growth, urging them not to be distracted by the political noise generated by the chief executive’s non-traditional type of governance.

“Mr. Duterte remains fully committed to keeping the economy on its upward trajectory and making growth inclusive for all Filipinos,” Finance Secretary Carlos G. Dominguez III said.

Meanwhile, the government’s local debt slightly rose by 0.5 percent in September to R3.904 trillion from R3.883 trillion in the same month last year.

The local debt was mainly composed of government securities at R3.903 trillion as of September.

Under the 2017 Budget of Expenditures and Sources of Financing (BESF), the government expects to end this year with a total debt of R6.187 trillion, up by 3.6 percent compared with R5.968 trillion in the previous year.

Of the total projected debt, local obligations are expected to reach R4.11 trillion this year, while offshore debts are seen to amount to R2.076 trillion.

But despite the expected increase in nominal terms, the government is projecting that its debt-to-gross domestic product (GDP) ratio would continue to improve from 44.7 percent to 42.6 percent by the end of the year.

Dominguez is also expecting lower reliance in foreign debt this year from a 65:35 mix in 2015 to 66:34 this year.

“Today, only a third of the national government debt is from foreign borrowing. The foreign debt component of the national debt declined to 15.6 percent of GDP by the end of 2015,” Dominguez said.

“Our policy is to source as much of our financing needs from domestic sources,” he added.