NG debt hits record PHP 15.35 trillion

The National Government’s (NG) outstanding debt rose to a fresh high of P15.35 trillion as of end-May, reflecting the impact of the peso weakness on foreign currency-denominated debt, the Bureau of the Treasury (BTr) said.

Data from the BTr on Thursday showed that outstanding debt increased by 2.2% from P15.02 trillion as of end-April. Debt jumped by 8.4% from P14.15 trillion a year ago.

“Total debt increased by P330.39 billion or 2.2% from the end-April 2024 level primarily due to the impact of local currency depreciation on the valuation of foreign currency-denominated debt,” the BTr said in a press release.

The peso closed at P58.52 against the dollar at end-May, depreciating by P0.94 from its P57.58 finish as of end-April.

The BTr said the bulk or 68% of the total debt stock came from domestic sources.

As of end-May, outstanding domestic debt inched up by 1.3% to P10.44 trillion from P10.31 trillion in the previous month. Year on year, it jumped by 8.9% from P9.59 trillion.

“The increase resulted from the P131.66-billion net issuance of government securities and P2.68-billion effect of peso depreciation on foreign currency-denominated domestic debt,” BTr said.

Government securities accounted for nearly all of domestic debt at P10.44 trillion, BTr data showed.

Meanwhile, external debt accounted for 31.96% of the total outstanding debt.

As of end-May, external debt rose by 4.2% to P4.9 trillion from P4.71 trillion as of end-April. It was also higher by 7.4% from P4.57 trillion a year earlier.

“For May, the increase in external debt can be attributed to P122.04 billion in net foreign loan availment and P76.94 billion in upward revaluation of US dollar-denominated debt,” the BTr said.

“Meanwhile, favorable third-currency movement provided a P2.94-billion downward revaluation effect.”

External debt was composed of P2.29 trillion in loans and P2.62 trillion in debt securities

Debt securities consisted of P2.22 trillion in US dollar bonds, P219 billion in euro bonds, P64 billion in Japanese yen bonds, P58 billion in Islamic certificates and P54 billion in peso global bonds.

Meanwhile, the NG’s guaranteed obligations decreased by 1.6% to P350 billion as of May, from P356 billion in April. It also dropped by 7.8% from P379 billion in the same period in 2023.

“The decline in NG guarantees was due to net repayment on both domestic and external guarantees amounting to P4.36 billion and P3.55 billion, respectively,” BTr said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the rise in NG debt to the recent global bond issuance.

“The latest increase is largely due to the $2-billion global bond issuance in early May 2024,” he said in a Facebook Messenger chat.

The Philippines raised $2 billion (P114.7 billion) from its dual-tranche dollar bond issuance in May.

Mr. Ricafort also noted elevated interest rates drove up borrowing costs.

The central bank has kept its key policy rate at an over 17-year-high of 6.5% since October 2023.

The peso’s recent depreciation also contributed to the higher debt stock, Mr. Ricafort said. In May, the peso sank to the P58 level for the first time since November 2022.

Stronger tax collections and other fiscal reform measures would help reduce the country’s debt, Mr. Ricafort said, but added that introducing new taxes should be the last option.

“The need for sustainable revenue is much needed. It comes at a time when interest rates are rising too,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message.

The government plans to borrow P2.57 trillion this year, 75% of which will come from domestic sources and the rest from foreign sources.

As of the first quarter, the NG’s debt as a share of the gross domestic product (GDP) stood at 60.2%. This was below 61.1% a year ago but higher than 60.1% at the end of 2023.

The government is targeting a 60.3% debt-to-GDP ratio by yearend, slightly above the 60% threshold deemed manageable for developing economies. It seeks to bring this down further to 55.9% by 2028. –Beatriz Marie D. Cruz, Reporter