EXTERNAL debt taken on by developing countries grew to $7.8 trillion in 2018, a level considered “moderate” for a segment of the world economy that needs to invest heavily in development, the World Bank Group said.
Total external debt of low- and middle-income countries rose 5.3% last year but on a net debt flow basis — or gross disbursements less principal payments — external debt fell 28% to $529 billion, according to the World Bank’s International Debt Statistics 2020 report.
The Philippines is currently classified as a lower-middle-income economy. Socioeconomic Planning Secretary Ernesto M. Pernia is projecting the Philippines as a possible upper-middle-income country by next year.
World Bank Group President David Malpass said low- and middle-income countries will need more investment to spur their economies.
“To grow faster, many developing countries need more investment that meets their development goals,” Mr. Malpass was quoted as saying in a statement.
The bank said the overall debt stocks saw a 15% jump in Chinese debt as investors sought out renminbi-denominated assets, it said.
Net debt inflows to developing countries from multilateral creditors likewise jumped by 86%, “principally due to the International Monetary Fund’s support for Argentina,” it said.
Meanwhile, bond issues declined 26% to $302 billion in 2018 due to heightened global uncertainty, a tighter capital market and credit ratings downgrades.
“Issues in 2018 were characterized by longer maturities and all were oversubscribed,” it added.
National Treasurer Rosalia V. De Leon said the Philippines continues to favor borrowing from domestic sources amid strong liquidity in the economy and to reduce the exposure to global crises.
“Funding continues to have an onshore bias to take advantage of strong liquidity and lessen vulnerability to external headwinds,” Ms. De Leon said in a phone message.
The national government’s outstanding debt rose 1.73% or P135.03 billion from a month earlier to P7.939 trillion as of end-August, due to the peso’s depreciation and net issuances of both external and domestic loans.
Of the total stock, 33.59% came from external markets while 66.41% was borrowed locally.
The government plans to source 73% of its funds locally and borrow the remaining 27% from foreign creditors.
It is looking to raise P1.189 trillion this year from to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product.
Meanwhile, Mr. Malpass also said debt transparency across all government agencies is a “critical” part of encouraging more investment.
“Debt transparency should extend to all forms of government commitments, both explicit and implicit. Transparency is a critical part of attracting more investment and building an efficient location of capital, and these are essential in our work to improve development outcomes.” — Beatrice M. Laforga
