THE weakening of the Philippine peso drove the country’s outstanding debt to reach a fresh record high of P14.35 trillion at the end of August, according to the Bureau of the Treasury (BTr).
The Treasury said the national government’s outstanding debt rose by P105.28 billion from last month’s P14.244 trillion “primarily” due to peso depreciation.
The Treasury pointed out that the local currency weakened to P56.651 in August from P54.834 in July against the US dollar.
On an annual basis, the peso-dollar exchange rate declined by P0.48 centavos from P56.171 recorded in August of last year.
Treasury data showed the state’s outstanding debt rose by 10 percent from P13.021 trillion recorded in the same month of 2022.
“Of the total debt stock, 31.8 percent are from external sources while 68.2 percent are from domestic borrowings,” the Treasury said on Monday.
The country’s latest debt figure is already 98.09 percent of the national government’s anticipated P14.63-trillion outstanding debt by the end of the year.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said fresh record highs for the state’s outstanding debt remains possible in the coming months in light of the national government’s foreign-denominated bond issuances.
The national government offered retail dollar bonds (RDB) recently, which finance officials noted could exceed $1 billion. The state is expected to debut its Islamic bonds or sukuk bonds before the end of the year, which is projected by finance officials to raise $1 billion for the national government.
“The new record high in the outstanding national government debt may be attributed to wider budget deficits amid higher prices/inflation that also bloated government expenditures, higher interest rates that raised borrowing costs of the government, weaker peso exchange rate vs. the US in recent years that raised the peso equivalent of the government’s foreign debts, continued increase in infrastructure spending,” Ricafort said.
Ricafort pointed out that tax and fiscal reforms as well as intensified tax revenue collections are critical in reducing the country’s outstanding debt and bringing down the national government’s debt-to-GDP ratio below 60 percent.
He noted that the easing of the national government’s debt-to-GDP ratio to 61 percent as of the end-second quarter could be attributed to faster economic growth that “increased the denominator and mathematically reduced” the ratio more than to declining debt.
“However, the outstanding national government debt could still go up especially if government borrowings are frontloaded again to finance the budget deficit, also partly to hedge government borrowings in view of the still rising trend in US/global/local short-term interest rates in recent months,” he said.
Domestic, external debt
The Treasury said the country’s domestic debt as of end-August settled at P9.79 trillion, about P21.24 billion lower than the previous month’s P9.812 billion.
The Treasury explained that the country’s domestic debt fell on a monthly basis because the state’s debt redemption offset its total amount of new domestic debt issuance.
“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,” it said.
“This was partially offset by the P2.90-billion incremental value caused by peso depreciation on foreign currency-denominated domestic securities,” it added.
However, the domestic debt was 9.5 percent over the P8.943 billion recorded in August of 2022. Since end-December 2022, the national government’s domestic debt has already increased by P582.74 billion, according to the BTr.
Meanwhile, the national government’s external debt during the reference month was estimated at P4.56 trillion, P126.52 billion higher on a monthly basis.
“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 Treasury said.
“Net availment of foreign loans also added P1.78 billion to the reference month’s external debt stock,” it added.
Nonetheless, the state’s external borrowings was 11.8 percent higher than the P4.078 trillion recorded amount in August of 2022, based on BTr data.
“[National government] external debt has increased by P347.98 billion or 8.3 percent from the end-December 2022 level,” it said.
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