Govt debt hits P7.73T at end-2019
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Wed, 29 Jan 2020 16:30:53 +0000
THE outstanding debt of the national government rose to P7.73 trillion at the end of 2019, primarily due to net availments and exchange rate adjustments, but its share to the economy improved, the Bureau of the Treasury (BTr) reported on Wednesday.
In a statement, the BTr said the amount was a 0.3-percent or P21.64-billion increase from the P7.70 trillion posted in end-November.
“Of the total debt stock, 33.7 percent are external debt, while 66.3 percent are domestic debt,” it added.
Domestic borrowings totaling P5.12 trillion — up 0.2 percent from the end-November amount — accounted for the bulk of outstanding debt, while external debt increased by 0.4 percent to P2.60 trillion.
Outstanding debt the year before stood at P7.29 trillion, with domestic and foreign obligations at P4.77 trillion and P2.51 trillion, respectively.
The end-2019 debt was equivalent to 41.5 percent of gross domestic product (GDP), lower than the programmed 41.7 percent and 41.9 percent posted a year ago.
“The improved debt-to-GDP ratio is a result of prudent cash and debt management, backed by steady economic growth,” the BTr said.
In a comment, Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the debt levels were expected on account of the government’s expansionary fiscal strategy.
“Although economic growth underperformed last [year] due to the delayed [approval of the] national budget and the consequent weak institutional absorptive capacity in spite of the spending catch-up, these are within what government economic managers have articulated regarding debt level targets, i.e., national debt will be slanted toward local ones versus external sources to keep away from external volatilities,” Asuncion explained.
He said debt levels were expected to continue to trend the same this year as the government continued its focus to spend more on infrastructure and other socioeconomic development goals.
Meanwhile, University of the Philippines economics professor Agustin Arcenas warned that higher government debt could dampen investments and slow down economic activity.
According to him, higher state debt means people would compete for funds in the local financial market, which could result in higher interest rates.
And if these rates go up, Arcenas said, firms could be discouraged to invest or expand their businesses because it would be expensive to borrow from banks.
Commenting on the debt-to-GDP ratio, Rizal Commercial Banking Corp. economist Michael Ricafort believes the improved figure may reflect the government’s improved fiscal performance with the passage of more tax reform measures in recent years that resulted in more recurring sources of state tax revenues.
Higher domestic obligations
The BTr also said higher domestic obligations during the month was “mainly due to the net issuance of government securities amounting to P11.96 billion and the P0.02-billion effect of [the] peso depreciation on onshore dollar bonds.”
The bureau traced the expansion in external debt to the net availment of foreign loans worth P2.51 billion and the combined effect of local and third-currency fluctuations, which increased the value of foreign debt by P2.25 billion and P4.90 billion, respectively.
A foreign exchange rate of P50.80 against the dollar was used for the latest data, compared with end-November’s P50.75:$1. The exchange rate used a year earlier was P52.56:$1.
Government-guaranteed debt rose from end-November by 2.9 percent or P13.74 billion to P488.74 billion at end-2019. It was up 0.2 percent from the year-ago figure.
The month-on-month increase, the bureau said, “was due to local and third-currency fluctuations that increased the value of external guarantees by P0.20 billion and P1.02 billion respectively, and the net issuance of domestic guarantees amounting to P13.85 billion.”
This was tempered by the net repayment of external guarantees amounting to P1.32 billion, it added.
Earlier, the Treasury bureau said the government would borrow more money from local sources in the first quarter.
January-to-March borrowings were set at P420 billion, up 90.90 percent from P220 billion in the fourth quarter of 2019 and 16.66 percent from P360 billion in the same period last year.
Of the amount set, the government would borrow P240 billion through the issuance of Treasury bills and the remaining P180 billion through Treasury bonds.