Philippine government’s debt reaches record PHP 16 trillion

The national government’s (NG) outstanding debt inched up to a fresh high of PHP 16.02 trillion as of end-October amid the peso’s depreciation against the US dollar, the Bureau of the Treasury (BTr) said.

Data from the BTr on Tuesday showed that outstanding debt went up by 0.8% or by PHP 126.95 billion to PHP 16.02 trillion as of end-October from PHP 15.89 trillion as of end-September.

“The increase was primarily driven by the valuation impact of peso depreciation against the US dollar from PHP 56.017 at end-September 2024 to PHP 58.198 at end-October 2024,” the BTr said in a statement.

Year on year, debt jumped by 10.6% from PHP 14.48 trillion. Of the total debt stock, 67.98% came from domestic sources.

As of end-October, outstanding domestic debt slid by 0.4% to PHP 10.89 trillion from PHP 10.94 trillion at the end of September.

Government securities accounted for nearly all of domestic debt.

Year on year, domestic debt increased by 10% from PHP 9.9 trillion.

“The decline was primarily due to the PHP 52.65-billion net redemption of government securities, partially offset by the PHP 6.23-billion escalation in peso conversion of US dollar-denominated domestic debt brought about by the weakened peso,” the BTr said.

Meanwhile, external debt rose by 3.5% to PHP 5.13 trillion at end-October from PHP 4.96 trillion at end-September, the BTr said.

Year on year, external debt increased by 12.05% from PHP 4.58 trillion in the same period a year ago.

“The increase was driven by net foreign loan availments totaling PHP 20.47 billion, as well as foreign exchange movements, which added P152.9 billion to external debt,” BTr said.

The Treasury said the peso depreciation against the US dollar has increased external debt by PHP 193 billion.

“However, this has been tempered by the PHP 40.1-billion effect of favorable third-currency movements relative to the US dollar,” it said.

External debt comprised of PHP 2.42 trillion in loans and PHP 2.71 trillion in global bonds as of end-October.

Broken down, government securities consisted of PHP 2.32 trillion in US dollar bonds, PHP 218.49 billion in euro bonds, PHP 58.2 billion in Islamic certificates, PHP 57.93 billion in Japanese yen bonds, and PHP 54.77 billion in peso global bonds.

Meanwhile, the NG guaranteed obligations at the end-October increased by 10.4% to PHP 411.76 billion from PHP 372.86 billion as of end-September.

“This resulted from PHP 35.85 billion in net availments of domestic guarantees and the P6.15-billion effect of peso depreciation against the US dollar, although partially attenuated by the PHP 3.1-billion downward revaluation in external guarantees linked to third-currencies movements,” the BTr said.

Year on year, NG guaranteed obligations jumped by 14.1% from PHP 361 billion.

“I can only surmise that the increasing fiscal deficit in the face of limited tax revenues will really ultimately result in higher NG debt from the end-Sept. level of PHP 15.9 trillion to over PHP 16 trillion for October,” GlobalSource country analyst Diwa C. Guinigundo said.

The Development Budget Coordination Committee on Monday raised the deficit ceiling for 2024 to PHP 1.52 trillion, representing -5.7% of gross domestic product (GDP) from PHP 1.48 trillion or -5.6% of GDP previously.

“In peso terms, dollar obligations will be higher including the corresponding debt servicing. If the dollar continues to strengthen relative to the peso and other currencies and revenue intake of NG remains limited, the outlook is not exactly encouraging,” Mr. Guinigundo said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said debt remained high as the government borrowed more to fund the budget deficit.

“Weaker peso exchange rate against the US dollar by about 15% since 2022 also effectively increased the peso equivalent of US dollar- and other foreign currency-denominated debt of the National Government,” he added.

Mr. Ricafort said rate cuts by the US Fed and Bangko Sentral ng Pilipinas would help reduce debt servicing costs.

At the end of September, the NG debt as a share of GDP stood at 61.3%, higher than 60.2% a year earlier and 60.1% at end-2023.

This was still above the 60% threshold deemed by multilateral lenders as manageable for developing economies.

The government aims to lower the debt-to-GDP ratio to 60.6% by the end of 2024.

The NG’s debt stock is expected to hit P16.06 trillion at the end of 2024. — Aubrey Rose A. Inosante