THE outstanding debt of the national government rose to P5.98 trillion in July, up 2.3 percent or P135 billion from a year earlier as the peso value of foreign obligations rose on currency fluctuations, the Bureau of the Treasury (BTr) said over the weekend.
Month-on-month, the government’s outstanding debt surged by 0.6 percent from P5.94 trillion in June.
This means that during the Duterte administration’s first month in office, the government incurred an additional debt of P34 billion.
Foreign debt increased by 11 percent year-on-year and 0.3 percent month-on-month to P2.12 trillion.
“The change was the combined effect of currency fluctuations on US-dollar and third currency-denominated debt that raised the peso value of outstanding obligations by P3.74 billion and P3.15 billion, respectively,” the bureau said.
This more than offset the P570 million net repayments for external obligations.
Foreign borrowings in July were priced at P47.09 to a dollar compared with P45.60 a year earlier, and P47.00 in June.
The local debt component dropped 0.05 percent year-on-year to P3.85 trillion. From June, domestic debt rose by 0.7 percent or P28.12 billion.
The BTr attributed the increase to the net issuance of government securities and the revaluation of dollar-denominated bonds as the peso depreciated.
Debt guaranteed by the national government rose by 39 percent to P562 billion from P402 billion. Month-on-month, government-guaranteed debt declined by 0.2 percent or P860 million from P563 billion.
Net repayments on both domestic and external guarantees of government amounting to P2.47 billion and P360 million, respectively, helped reduced the amount of government-guaranteed debt.
“These outpaced the impact of US dollar and third currency adjustments that raised the peso value of guarantees by P0.56 billion and P1.41 billion, respectively,” it said.
In better shape
Finance Secretary Carlos Dominguez 3rd said the lower debt-to-gross domestic product (GDP) ratio places the country in “better shape” to borrow funds for infrastructure spending and human capital and social protection programs under the budget proposal for 2017.
In a recent Senate finance committee hearing, he said the government would borrow more from the domestic debt market than foreign sources.
A borrowing mix that favors foreign sources is usually subject to foreign exchange fluctuations and overly strengthens the value of the peso against the dollar, which adversely affects OFWs and Filipino exporters, he said.
Even with higher borrowings from domestic creditors, the government would not be crowding out private investments from local capital owing to the excess liquidity in the market. “We are in a ‘Goldilocks moment’ in the world economy,” Dominguez said.
A Goldilocks event refers to an economy characterized by moderate, stable growth with low interest rates and low inflation, which allows a market-friendly monetary policy.
“Our debt has dropped to below 50 percent of our GDP, and in fact is still falling, so we are in a good position to borrow and spend wisely for our people,” he added.
As of the first half of 2016, the country’s debt-to-GDP ratio stood at 43 percent, from 44.9 percent a year earlier and 44.7 percent as of end-2015.
“Today, only a third of the national debt is from foreign borrowing compared to almost half in 2009. The foreign debt component of the national debt declined from 15.6 percent of GDP in end-2015 to 15.3 percent of GDP in end-June 2016,” Dominguez said.
The decline in debt-interest payments will continue, he said, noting that interest payments declined to 14.7 percent of revenues by the end of 2015.
A lower debt service burden would help offset the budget deficit target of 3 percent of the GDP, Dominguez said. The slightly higher budget deficit “will translate into substantial infrastructure programs and human capital expenditures next year.”