THE NATIONAL GOVERNMENT’S (NG) outstanding debt reached a record P14.35 trillion as of end-August, mainly due to the peso depreciation against the US dollar, the Bureau of the Treasury (BTr) said on Monday.

Outstanding debt inched up by 0.7% from P14.24 trillion as of end-July, data from the BTr showed.

“The P105.28 billion or 0.7% increment from the previous month’s level was primarily due to the peso depreciating from P54.834 to P56.651 against the US dollar over the reference period,” the BTr said in a statement.

National Government outstanding debtThe debt stock rose by 10.2% year on year from P13.02 trillion as of end-August 2022.

Year to date, outstanding debt went up by 6.9% from P13.42 trillion as of end-December 2022.

More than two-thirds or 68.2% of the NG’s debt portfolio came from domestic sources, while the rest were from foreign borrowings.

As of end-August, domestic debt increased by 9.5% to P9.79 trillion from P8.94 trillion a year ago.

However, domestic borrowings slipped by 0.2% from P9.81 trillion in July, due to “large retail bond maturities.”

“New domestic debt issued during the month totaled P229.29 billion with debt redemption of P253.43 billion, resulting in a net repayment of P24.14 billion,” the BTr said.

“This was partially offset by the P2.9-billion incremental value caused by peso depreciation on foreign currency-denominated domestic securities,” it added.

Data from the Treasury showed that the peso closed at P56.651 versus the greenback as of end-August, depreciating by 3.2% from P54.834 as of end-July.

In the eight months to August, the domestic debt mix consisted almost entirely of government securities.

On the other hand, external debt stood at P4.56 trillion at the end of August, up by 11.8% from P4.08 trillion in the same month a year ago.

Month on month, it rose by 2.9% from P4.43 trillion as of end-July.

“Peso depreciation against the US dollar caused a P146.85-billion upward revaluation of US dollar-denominated debt in August, although partially offset by the P22.11-billion downward revaluation of the third-currency debt component,” the BTr said.

“Net availment of foreign loans also added P1.78 billion to the reference month’s external debt stock,” it added.

Broken down, foreign debt consisted of P2.07 trillion in loans and P2.48 trillion in global bonds.

As of end August, the NG’s overall guaranteed obligations inched up by 0.9% to P366.58 billion from P363.4 billion as of end-July.

“The higher level of guaranteed debt is attributed to the net availment of domestic guarantees amounting to P2.44 billion and the P4.03-billion revaluation effect of peso depreciation on external guarantees surpassing the P3.29 billion in repayments,” the BTr added.

Year on year, guaranteed debt dropped by 6.7% from P392.76 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher NG outstanding debt as of end-August was mainly due to the weaker peso.

The local currency almost breached the P57-level during the month, depreciating to as low as P56.84 on Aug. 15.

Mr. Ricafort said that elevated inflation and interest rates also pushed borrowings higher.

“The new record high in the outstanding National Government debt may be attributed to wider budget deficits amid higher prices that also bloated government expenditures,” he said in an e-mail.

Headline inflation spiked to 5.3% in August, the first time it accelerated in seven months. It was also the 17th consecutive month that inflation surpassed the central bank’s 2-4% target range.

For the first eight months of 2023, inflation averaged 6.6%, still above the revised 5.8% full-year forecast of the Bangko Sentral ng Pilipinas (BSP).

The BSP has raised borrowing costs by a total of 425 basis points from May 2022 to March 2023. This brought the key policy rate to 6.25%, the highest in almost 16 years.

The NG’s debt as a share of gross domestic product (GDP) stood at 61% at the end of June. This remained above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The government aims to cut the debt-to-GDP ratio to less than 60% by 2025. — Luisa Maria Jacinta C. Jocson