By Tobias Jared Tomas
Outstanding NATIONAL GOVERNMENT (NG) debt hit a record 12.68 trillion pula at the end of March as domestic and offshore borrowing increased, the Bureau of the Treasury (BTr) said on Thursday.
Preliminary data from the BTr showed debt stock jumped 17.73% from 10.77 trillion pesos a year ago, and 4.8% from February.
In a statement, the BTr said the increase in debt was “mainly due to the net issuance of government securities to local and external lenders”.
Of this total, 70% of the debt portfolio came from domestic lenders, while the rest came from foreign sources.
Outstanding domestic debt stood at 8.87 trillion pesos at the end of March, up 14.5 percent year-on-year and 5.4 percent month-on-month. The national government raised 457.80 billion pesos through the successful issuance of national treasury bonds (RTBs) and debt swaps during the month.
Of the total stock of domestic debt, 8.57 trillion pesos came from government securities, up 18.9 percent year-on-year and 5.6 percent month-on-month.
At the end of March, the stock of domestic debt was 8.5%, 698.24 billion pula more than the level at the end of December.
Meanwhile, external debt rose 25.8 percent year-on-year to 3.81 trillion pesos at the end of March. It edged up 3.6% from February.
The Treasury attributed the increase in external debt to the net recourse to external financing which reached P122.69 billion at the end of March. This included 117.33 billion pesos ($2.25 billion) from the issuance of global bonds in three tranches of 5 years, 10.5 years and 25 years.
“The fluctuation in the exchange rate of the third currency further reduced the peso value of external collateral by 5.16 billion pula, offsetting the effect of 2.31 billion pula from the depreciation of the local currency against the (US dollar),” he said.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the government issued RTBs and global bonds to raise funds for various projects ahead of the election ban on public works that took place. started on March 25.
“[The] The upward trend in interest rates, with long-term interest rates at new pre-pandemic highs recently, could increase interest payments for new borrowing,” he said.
Mr. Ricafort noted that the debt level could reach new records in the coming months, as the government has to borrow funds to meet the growing budget deficit.
In April, the government raised $559 million through a Samurai bond issue and took out a 30 billion yen ($230 million) loan from Japan.
ING Bank NV Manila chief economist Nicholas Antonio T. Mapa said in an email that the country could be vulnerable to credit rating actions, with total debt reaching around 60.6% of gross domestic product. (GDP) at the end of March.
“Fitch had previously expressed some concern about the ability of the Philippines to significantly reduce this ratio over time,” he added.
In 2021, the Philippines’ debt-to-GDP ratio hit a 16-year high of 60.5%. This figure is above the 60% threshold considered manageable by multilateral lenders for developing economies.
The high level of debt leaves the incoming administration with “very limited options,” Leonardo A. Lanzona, an economics professor at Ateneo de Manila University, said via Viber.
“Politicians who promise unrealistic programs such as lower rice prices should be avoided… The first item on the agenda of the next administration is to design an economic program that will produce enough growth to pay our debt “, did he declare.
“It may mean even more debt, but the program must be credible enough to assure financial agencies that we can eventually pay our debts.”
For his part, Mapa said the current administration inherited a fairly sound fiscal position, a luxury the new president will not have.
The next president will have to be careful in his decisions during his first 100 days in office, as investors will watch whether fiscal consolidation is a top priority, he said.
“If spending and borrowing continue to inflate near-term debt levels, we believe the Philippines will experience a credit downgrade by the end of the year, which will drive up our borrowing costs as that the Philippines would need funding,” Mapa said. mentioned.
Earlier in February, Fitch Ratings maintained the Philippines’ BBB credit rating, but with a “negative” outlook, meaning Fitch could downgrade the rating within 12 to 18 months.
Meanwhile, Ricafort stressed the need for the next administration to maintain economic and fiscal reform measures.
Last month, Finance Secretary Carlos G. Dominguez III said the economy needed to grow above 6% a year for the next five to six years to reduce debt.
“The next administration will have to design policies and stick to very strict fiscal discipline to get out of this debt problem,” he said.
The national election will take place on May 9 and the new administration will take over in July.
Since 2020, the Philippines has borrowed 1.3 trillion pesos and received grants worth 2.7 billion pesos to fund its response to the pandemic, including coronavirus vaccines.
The Ministry of Finance said it would take 40 years to repay these pandemic-related loans and grants.