Gross borrowings hit PHP1.4T in 1st half

The National Government’s (NG) gross borrowings rose nearly a third to PHP 1.42 trillion in the first semester, the Bureau of the Treasury (BTr) reported.

Data from the BTr showed that the NG’s gross borrowings in the first six months jumped by 32.9% from PHP 1.07 trillion in the same period a year ago.

Domestic debt accounted for almost three-fourths or 74.25% of total gross borrowings during the six-month period.

Gross domestic debt surged by 42.5% to PHP 1.06 trillion in the first half from PHP 741.263 billion in the previous year.

Broken down, the BTr raised PHP 686.15 billion from fixed-rate Treasury bonds, PHP 283.763 billion from retail Treasury bonds, and PHP 86.584 billion from Treasury bills.

Meanwhile, external borrowings in the January-June period went up by 11.3% year on year to PHP 366.441 billion from PHP 29.336 billion.

This consisted of PHP 163.607 billion in global bonds, PHP 145.059 billion in program loans, and PHP 57.775 billion in new project loans.

In June alone, the NG’s gross borrowings went up by 13.9% to PHP 166.487 billion from PHP 146.17 billion in the same month in 2022.

Month on month, total borrowings increased by 13.4% from PHP 146.783 billion in May.

Gross domestic borrowings rose by 49.2% to PHP 143.92 billion in June from PHP 96.448 billion a year ago.

The BTr raised PHP 125 billion from the issuance of fixed-rate Treasury bonds and PHP 18.92 billion from Treasury bills.

Meanwhile, gross external debt fell by 54.6% to PHP 22.567 billion during the month from PHP 49.722 billion. This was composed of PHP 19.903 billion in new project loans and PH PHP 2.664 billion in program loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the increase in gross borrowings in the first half was likely due to elevated inflation and high interest rates.

“Higher prices and interest rate expenses, as well as weaker peso exchange rate, all contributed to the need to borrow more,” Mr. Ricafort said in a Viber message.

Headline inflation eased to 5.4% in June from 6.1% both in May 2023 and June 2022.

This brought the average six-month inflation print to 7.2%, still higher than the central bank’s revised 5.6% full-year forecast and 2-4% target band.

The Bangko Sentral ng Pilipinas (BSP) has kept its benchmark interest rate at a near 16-year high of 6.25% for three straight meetings.

From May 2022 to March 2023, the BSP has raised borrowing costs by 425 basis points (bps).

“The further reopening of the economy towards greater normalcy may have also increased some government spending especially on infrastructure, thereby leading to the more gross borrowings to financing the deficit, (which) in turn, led to new record-high outstanding National Government debt levels in recent months,” he added.

The NG’s outstanding debt stood at PHP 14.15 trillion as of end-June, up by 10.6% year on year.

Debt as a share of gross domestic product (GDP) stood at 61% at the end of the second quarter. This was unchanged from the first quarter but still remained above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The Department of Finance expects the debt-to-GDP ratio to end the year at 61.4% and to below 60% by 2025.

“However, there is a need to increase the utilization of government funds/budget by some government agencies in view of the interest rates and other debt servicing costs involved, from an investments perspective and the need to deliver tangible benefits to justify the financing costs incurred, rather than idle or not fully utilized,” Mr. Ricafort added.

This year, the government plans to borrow PHP 2.207 trillion. Broken down, this consists of PHP 1.654 trillion from domestic sources and PHP 553.5 billion from external sources. — Luisa Maria Jacinta C. Jocson