Gov’t debt swells to record P11.6 trillion as of July

Published August 31, 2021, 5:13 PM

by Chino S. Leyco

Government debt snowballed to a record high of P11.61 trillion as of July this year.

Peso bills

Based on the Bureau of the Treasury’s report on Tuesday, Aug. 31, the public debt increased 26.7 percent from P9.164 trillion in the same month last year, or an addition of P2.446 trillion in the past 12-months.

In July alone, the national government has added P444.43 billion to the public debt, which stood at P11.166 trillion in the previous month.

According to the Treasury, the four percent jump in debt during the month was due to stronger US dollar against the peso, averaging 50.22 against the greenback in July from 48.7 billion in June.

But the Treasury admitted that the national government’s borrowing activities from both local and offshore lenders have also pushed up the total debt.

“From the start of 2021, total outstanding debt has grown by P1.82 trillion or 18.53 percent,” the Treasury bureau said in a statement.

Debts held by domestic creditors account for 69.9 percent of the total, equivalent to P8.12 trillion. This amount, however, is 2.3 percent higher compared with P7.94 trillion in the previous month.

“Growth in domestic obligations amounts to P1.42 trillion or 21.28 percent from the beginning of the year owing to heightened financing requirements,” the Treasury said.

Meanwhile, the national government’s outstanding external loans reached P3.49 trillion as of July, accounting for 30.1 percent of the total debt stock. Likewise, foreign obligations rose 8.2 percent from P3.227 billion in June.

“The net availment of foreign loans added P159.34 billion, including P146.17 billion from the issuance of US dollar Global Bonds,” the Treasury said.

Meanwhile, the Treasury said the impact of both local- and third-currency exchange fluctuations against the US Dollar added P100.66 billion and P3.39 billion, respectively.

“NG [national government] external debt has increased by P390.55 billion or 12.6 percent from the end-December 2020 level,” the bureau said.

But despite faster uptick government debt, Finance Secretary Carlos G. Dominguez III said this level of obligations is still considered manageable, based on the debt-to-gross domestic product (GDP) matrix.

Dominguez explained that governments around the world registered higher borrowings since the pandemic began last year but what sets the Philippines apart “is that we entered 2020 with a historic low debt-to-GDP ratio of 39.6 percent.”

“This means that we could better absorb additional borrowings than other countries whose debt ratios were already at 60 percent before the pandemic,” he said, referring to the international threshold of debt-to-GDP.

The country’s debt-to-GDP rose to 60.4 percent as of end-June 2021, but credit raters still consider this manageable, the finance chief said.

Dominguez said the bulk of the government’s fiscal resources is used for productive spending instead of debt servicing thus, the additional loans are “beneficial to economic development rather than a burden to growth.”

He also said the rise in government borrowings in recent years was due to higher investments in human capital and infrastructure.

“Now, deficit spending, provided that your return is better than the cost of your money, is a wise thing to do,” he added.

Based on the Department of Finance’s estimates, the national government’s outstanding debt will hit a record-high P13.41 trillion by end of 2022.

In 2021, the outstanding debt is projected to reach P11.55 trillion by yearend, up from P9.79 trillion at end-2020.