NG debt hits record P13.52 trillion amid weak peso

THE NATIONAL GOVERNMENT’S (NG) outstanding debt hit a record P13.52 trillion as of end-September, mainly due to the weakness of the peso and higher domestic borrowings, the Bureau of the Treasury (BTr) said on Thursday.

In a statement, the BTr said outstanding debt jumped 3.8% or P495.54 billion as of end-September from the then-record-high P13.02 trillion as of end-August, “primarily due to peso depreciation against the US dollar and the net issuance of government securities to support the budget.”

Year on year, the debt stock rose 13.4% from P11.92 trillion.

The BTr said debt increased by 15.2% from the P11.73-trillion level as of end-December 2021.

Of the total outstanding debt, 68.8% came from domestic borrowings while the rest was sourced from foreign creditors.

The domestic debt stock rose by 10.9% to P9.3 trillion as of end-September. Month on month, it increased 4% from P8.94 trillion as of end-August.

“For September, the increase in domestic debt resulted from the net issuance of government securities amounting to P352.09 billion and the P5.18-billion impact of local currency depreciation against the US dollar,” the BTr said.

The peso closed at P58.646 against the US dollar on Sept. 30, weakening by 13% from the P51 finish on Dec. 31, 2021, and by 4.9% from its P56.171 close as of end of August.

“Since the beginning of the year, the domestic debt portfolio has increased by P1.13 trillion or 13.8% due to continued preference for domestic financing to mitigate the effects of currency fluctuations,” BTr said.

Meanwhile, external debt jumped 19.5% to P4.22 trillion as of end-September, from P3.52 trillion a year ago. It increased 3.4% from P4.08 trillion in the previous month.

Broken down, external debt consisted of P1.89 trillion in loans and P2.32 trillion in global bonds.

“The increment in the level of external debt was due to the P179.69-billion impact of local currency depreciation against the USD (US dollar). This was partially offset by the P30.62-billion effect of third-currency depreciation against the USD and net repayment amounting to P10.80 billion,” the BTr said.

Year to date, external debt jumped 18.5% from P3.56 trillion “due to local- and third-currency fluctuations that increase the peso value of foreign denominated obligations.”

NG’s overall guaranteed obligations inched up 1.1% month on month to P397.22 billion, but fell 8.2% from a year ago.

“For September, the increment in guaranteed debt was primarily due to the impact of local currency depreciation amounting to P9.27 billion, offsetting the net repayment amounting to P1.43 billion and P3.48 net depreciation effect on third- currency denominated guarantees,” BTr said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that the increase in outstanding debt was due to the peso’s continued weakness against the US dollar.

“The outstanding National Government debt may have continued to increase on a month-on-month basis after slower monthly increments in previous months due to some frontloading or lumped borrowings amid the need to hedge amid rising interest rates,” Mr. Ricafort said.

“Higher interest rates would also increase the government’s interest rate payments and could lead to more borrowings. Higher inflation could also increase the government’s expenditures, widen the budget deficit, and, in turn, would lead to more debt.”

In September, the Bangko Sentral ng Pilipinas (BSP) increased its overnight borrowing rate by 50 basis points (bps) to 4.25%, and its corresponding lending rate to 4.75%. The BSP has raised rates by 225 bps since May.

Inflation quickened to 6.9% in September, driven by rising food, fuel and transport costs.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said that government borrowings are beneficial as long as they are utilized to drive economic growth.

“The increase in debt makes the country more dependent on growth in order to repay it.  This means that the increase in borrowings is fine as long as this increase is used for more productive projects,” he said in an e-mail.

“The government should be more transparent now and inform Filipinos where this is going to be used. Otherwise, we will end up paying for the debt without gaining any benefits from it,” he added.

The country’s debt-to-gross domestic product (GDP) level reached 62.1% at the end of the second quarter. This is higher than the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies, and significantly higher than the 39.6% seen at the end of 2019 and 54.6% as of end-2020.

The government is aiming to bring down the debt-to-GDP ratio to 61.8% by year end and 52.5% by 2028. — Luisa Maria Jacinta C. Jocson