Philippine government accrues PHP 11.2 trillion in debt

The Philippine national debt has skyrocketed to PHP 11.166 trillion in June.

Image source: Business World

The Philippine government has been recently borrowing more funds from international organisations to finance its efforts to stamp out the spread of COVID-19, but its national debt has increased to PHP 11.166 trillion by the end of June, according to a recent report by BusinessWorld. 

The Philippine Bureau of the Treasury has released preliminary data that showed the rise of the stock of debts of the Philippine government by 0.9 per cent from PHP 11.07 trillion at the end of May, higher by 23 percent than PHP 9.054 trillion last year. 

The pile of debts has been growing by 14 per cent from PHP 9.795 trillion as the government borrowed PHP 1.371 trillion that consists of 71 per cent in local debt and 29 per cent in external borrowings. 

Nevertheless, the overall securities of the government dropped from 25.6 per cent last year to 0.3 per cent last month, yielding PHP 7.398 trillion. 

A loan from the Bangko Sentral ng Pilipinas or BSP worth PHP 540 billion added to the local stock of debts, while the external debt increased by 2.3 per cent to PHP 3.23 trillion last month. 

The bureau said, “The increase in external debt was due to the impact of local-currency depreciation against the US dollar amounting to P64.86 billion and net availment of foreign loans amounting to P25.52 billion. These were tempered by the P18.27-billion decrease in the peso value of debt denominated in other currencies such as the EUR (euro) and JPY (Japanese yen) due to currency appreciation”. 

The Philippine government had borrowed foreign loans worth PHP 1.42 trillion and global bonds worth PHP 1.81 trillion in global bonds that led its foreign debt to rise by 12.7 per cent to PHP 2.864 trillion last year.  

Michael L Ricafort, chief economist of Rizal Commercial Banking Corporation, said that the Philippine stock of debts rose while the government tried to make do with a decreasing budget due to the restrictions over COVID-19, adding, “Increased government spending especially on infrastructure to help pump-prime the economy as a major pillar of the economic recovery program also led to wider budget deficits and some pick up in outstanding government debt recently”. 

The overall guaranteed debt declined by 4.7 per cent from PHP 460 billion in June last year to PHP 438.6 billion at the end of June, although the debt rose every month by 2.8 per cent this year. 

The Bureau of the Treasury cited the freshly bought guarantees worth PHP 11.07 billion and the impact of the deprecation of local currency worth PHP 3.98 billion that fluctuations on the rate of exchange for third currencies and repayments of debt offset in part as the cause for the increase. 

Ricafort told BusinessWorld that the pile of debts of the government will keep on growing as it spends more for public projects especially in infrastructure in the subsequent months ahead of elections in May next year, adding, “The budget deficit-to-GDP (gross domestic product) and debt-to-GDP ratios of the Philippines have been relatively lower compared to some countries in ASEAN/Asia amid fiscal discipline in view of limited government funds allowed under the law for any additional stimulus measures”. 

The government seeks to fund local and foreign lenders with PHP 3 trillion this year to help replenish its budget whose deficit might hit 9.3 per cent of the Philippine gross domestic product or GDP, and observers have been foreseeing the rise of the level of Philippine debt to 59.1 percent of the GDP at the end of this year from 54.6 percent at the end of last year and 39.6 percent at the end of 2019.