THE national government’s (NG) outstanding debt grew at end-2019 due to increased borrowings but was still smaller relative to the economy, the Bureau of the Treasury (BTr) reported on Wednesday.

The national debt reached P7.731 trillion as of end-2019 from P7.292 trillion the previous year 2018, up six percent. Despite the nominal growth in obligations, the debt-to-gross domestic product (GDP) ratio last year was at 41.5%, down slightly from the 41.8% seen in 2018, data from the BTr showed.

Philippines debt-to-GDP ratio in 2019 lowest since 1986

The end-2019 debt-to-GDP ratio was also better than the government’s target of 41.7%.

The Treasury said the improvement was a “result of prudent cash and debt management backed by steady economic growth.”

During the economic team’s meeting in December last year, Finance Secretary Carlos G. Dominguez III said they maintained the debt-to-GDP ratio target for this year at 42%.

Sought for comment, Michael L. Ricafort, chief economist at the Rizal Commercial Banking Corp., said the improvement in the country’s debt-to-GDP ratio in 2019 is attributable to the “government’s underspending in most of 2019, with budget deficit below the ceiling set by the government, largely brought about by the delay in the approval of the 2019 national budget.”

Mr. Ricafort, however, noted that higher tax collection and the government’s efforts to run after tax evaders, especially those in the Philippine offshore gaming industry, contributed to the government’s overall revenues and helped narrow the fiscal gap.

He said this effectively reduced the government’s borrowings for the year and the overall debt stock.

“The easing/improving trend in the debt-to-GDP ratio could still be sustained in the coming years, especially with more tax/fiscal reform measures such as higher sin taxes, the latest and last phase of higher excise taxes on fuel effective January 2020 under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, as well as intensified tax collection campaigns/efforts, especially on tax cheats/evaders,” Mr. Ricafort added.

Latest data showed the budget gap in January to November last year was narrower by 14.27% year on year at P409.1 billion — only 67% of the downgraded P610-billion deficit ceiling for 2019.

The economy expanded at a slower-than-expected pace in 2019 to average at 5.9%, missing the 6-6.5% official target range and also slower than 2018’s 6.2% print.

Last year’s performance broke the seven-year streak of at least six percent growth. It was also the lowest in eight years.

Economists and economic managers blamed the slower expansion on the delayed approval of last year’s budget, which they said cost the economy a full percentage point in growth.

Broken down, month on month, outstanding debt inched up by 0.3% from the P7.709 trillion posted as of end-November, which the Treasury attributed to “net availments and exchange rate adjustments.”

Domestic loans made up 66.3% of the total or P5.127 trillion, which is up 7.3% year on year from P4.776 trillion in 2018 and also 0.2% bigger than the previous month’s P5.115 trillion.

The Treasury said the issuance of government securities worth P11.96 billion as well as “the P0.02 billion effect of peso depreciation on onshore dollar bonds” pushed domestic debt to increase in December from the end-November level.

The peso depreciated to P50.802 versus the dollar as of December from P50.758 at end-November.

Aside from the programmed Treasury bill and Treasury bond issuances, the government also raised P4.961 billion via the one-year Premyo bond sale in December.

Meanwhile, 33.66% of the total debt stock at end-2019 or P2.603 trillion was borrowed from external sources. This is an increase of 3.5% from the P2.515 trillion tallied in the previous year and by 0.4% from the P2.594 trillion posted at end-November 2019.

The higher offshore debt stock was largely due to the net availment of foreign loans as well as currency movements, according to the Treasury.

“For December, the increase in external debt was due to the net availment of foreign loans amounting to P2.51 billion and the combined effect of local and third-currency fluctuations which increased the value of foreign debt by P2.25 billion and P4.90 billion, respectively,” the statement read.

Guaranteed obligations stood at P488.75 billion in December, up 0.2% year on year. Month on month, guaranteed obligations marked a 2.9% hike from issuance of domestic guarantees worth P13.85 billion and from local and third-currency fluctuations, which pushed the value of external guarantees

However, the Treasury said “this was tempered by the net repayment of external guarantees amounting to P1.32 billion.”

The government borrows from local and foreign markets to plug its budget deficit, which is capped at 3.2% of the country’s GDP this year until 2022.

Of the P4.1 trillion budget for the year, the state has set a borrowing program of P1.4 trillion, of which 75% will be sourced domestically while the 25% will be raised by tapping offshore creditors. — Beatrice M. Laforga