Pandemic pushes Philippine gov’t debt to P9.8 trillion

THE National Government’s (NG) outstanding debt reached P9.8 trillion at the end of December 2020, pushing the debt-to-GDP ratio to the highest in over a decade, as it borrowed more to fund the pandemic response.

The Bureau of the Treasury (BTr) on Tuesday reported last year’s debt stock jumped by 26.7% from P7.731 trillion at the end of 2019, due to “higher funding requirements to respond to the coronavirus disease 2019 (COVID-19) pandemic.”

Month on month, the BTr said the debt stock went down by 3.3% from the end-November level of P10.13 trillion after the government settled its outstanding loans to the central bank.

This brought the debt-to-GDP ratio to 54.5% as of end-2020, from the record low of 39.6% in 2019.

Finance Undersecretary and Chief Economist Gil S. Beltran said the 2020 debt stock ratio was the highest in 11 years or since the 57.2% recorded in 2009, a year after the global financial crisis.

This also breached the 53.5% debt-to-GDP ratio projected by the Development Budget Coordination Committee (DBCC) for the year.

“[The debt ratio] is not alarming. The economy is expected to grow by 6.5-7.5% this year. This will enlarge the denominator and tend to reduce the ratio,” Mr. Beltran said via text message on Tuesday when asked to comment.

“Further, the debt is financeable given the country’s higher domestic savings pool boosted by remittances, BPO (business process outsourcing) earnings and 10 years of 6.4% annual GDP growth,” he added.

The share of domestic debt to the overall debt stock rose to 68.35% last year from 66.32% in 2019, the BTr said. The balance or 32% was sourced from foreign lenders.

Local outstanding debt stood at P6.695 trillion at the end of December, down 7% from the month prior after the Treasury settled its P540-billion loan with the Bangko Sentral ng Pilipinas (BSP). Year on year, domestic debt grew by 30.6% from P5.127 trillion as of end-2019.

The local debt stock consisted of P948 million in loans and P6.694 trillion in government securities.

Meanwhile, external outstanding debt rose 5.4% to P3.1 trillion month on month after the government issued $2.75 billion (P132 billion) in dollar-denominated bonds in December to further plug the ballooning deficit. External debt jumped by 19.1% from the P2.6 trillion as of end-2019.

Broken down, foreign debt stock included P1.312 trillion in loans and P1.788 trillion in government securities issued offshore.

The BTr said the third-currency denominated debt added P10.67 billion to the overall value of foreign debt but the appreciation of the peso reduced the total by P3.91 billion.

The Treasury used a peso exchange rate of P48.021 against the greenback for December.

Meanwhile, the National Government’s guaranteed obligations went up by 3.5% month on month to P458.35 billion in December after obtaining P27.52 billion in fresh local guarantees, while third currency adjustment added P1.47 billion to the overall value.

This more than offset the P13.18 billion paid for external guarantees, as well as the effect of the stronger peso versus the dollar which trimmed the total value by P250 million.

Total guaranteed obligations of the government rose by 6.2% as of end-December, from P488.746 billion at the end of 2019.

Mr. Beltran noted that despite the higher debt stock ratio, credit raters still maintained the sovereign ratings for the Philippines last year.

“Actually, credit rating agencies and analysts are aware of the higher deficit and the negative GDP growth and they maintained the investment grade rating. Also, peer countries are also facing higher debt ratios and even higher deficits,” he said.

Fitch Ratings affirmed last month the Philippines’ long-term foreign currency issuer default rating at “BBB” with a stable outlook, while S&P Global Ratings kept its BBB+ long-term credit rating with a stable outlook for the country in May 2020. Moody’s Investors Service also affirmed its Baa2 rating with a stable outlook last July.

For this year, the DBCC projected the debt-to-GDP ratio will continue to rise to 57%. — Beatrice M. Laforga