December 7, 2022

Filipino Guardian

Sentinels of Filipino Free Press

NG debt hits record 13.52 trillion pesos amid weak pesos

4 min read

Long lines of commuters can be seen along the Ortigas Extension in Taytay, Rizal. The National Government’s (NG) outstanding debt hit a new high of 13.52 trillion pesos at the end of September. — FILIPINO STAR/ WALTER BOLLOZOS

The outstanding NATIONAL GOVERNMENT (NG) debt hit a record 13.52 trillion pesos at the end of September, mainly due to peso weakness and higher domestic credit, the Bureau of the Treasury (BTr) said Thursday.

In a statement, BTr said outstanding debt rose 3.8%, or 495.54 billion pesos, by the end of September from a then-record high of 13.02 trillion pesos in late August, “mainly due to peso depreciation against the U.S. dollars and the net issuance of government securities to support the budget.”

Year-on-year, debt rose 13.4% from P11.92 trillion.

NG debt hits record 13.52 trillion pesos amid weak pesosAccording to BTr, the debt increased by 15.2% from 11.73 trillion pesetas as of the end of December 2021.

Of the total outstanding debt, 68.8% came from domestic borrowing, while the rest came from foreign creditors.

Domestic debt increased by 10.9% to P9.3 trillion at the end of September. Month-on-month, it rose 4% from 8.94 trillion pesos at the end of August.

“In September, the increase in domestic debt resulted from P352.09 billion of net government bond issuance and the P5.18 billion impact of the local currency’s depreciation against the US dollar,” the BTr said.

The peso closed at P58.646 against the US Dollar on September 30, weakening 13% from the close of P51 on December 31, 2021 and down 4.9% from its close of P56.171 in late August.

“Since the beginning of the year, the domestic debt portfolio has increased by 1.13 trillion pesos, or 13.8%, as domestic financing continues to be favored to mitigate the impact of currency fluctuations,” BTr said.

Meanwhile, the external debt rose 19.5% to 4.22 trillion pesos at the end of September, from 3.52 trillion pesos a year ago. It rose 3.4% from P4.08 trillion in the previous month.

A breakdown of the external debt consisted of 1.89 trillion pesos in loans and 2.32 trillion pesos in global bonds.

“The increase in external debt was due to the impact of the devaluation of the local currency against the USD (US Dollar) in the amount of P179.69 billion. This was partially offset by the 30.62 billion pesos effect of the devaluation of the third currency against the USD and a 10.80 billion pesos net repayment,” the BTr said.

Year-to-date, the external debt rose 18.5% from 3.56 trillion pesos “due to fluctuations in domestic and third-party currencies increasing the peso value of foreign-currency-denominated debt securities.”

NG’s total guaranteed obligations rose 1.1% month-on-month to 397.22 billion pesos but fell 8.2% year-on-year.

“In September, the increase in guaranteed liabilities was mainly due to the impact of local currency devaluation of P9.27 billion, resulting in the P1.43 billion net repayment and P3.48 net write-down effect on third-currency guarantees were compensated. ‘ said BTr.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said in a text message that the rise in outstanding debt was due to the peso’s continued weakness against the US dollar.

“Outstanding national government debt may have continued to rise month-on-month after rising more slowly in previous months as some pre-borrowed or credit lumped as hedging was needed amid rising interest rates,” Ricafort said.

“Higher interest rates would also increase government interest payments and could lead to more borrowing. Higher inflation could also increase government spending, widening the budget deficit and in turn leading to more debt.”

In September, Bangko Sentral ng Pilipinas (BSP) increased its overnight rate by 50 basis points (bps) to 4.25% and its lending rate to 4.75%. The BSP has hiked rates by 225 basis points since May.

Inflation accelerated to 6.9% in September, driven by rising food, fuel and transportation costs.

Leonardo A. Lanzona, an economics professor at Ateneo de Manila University, said government bonds are beneficial as long as they are used to spur economic growth.

“The increase in debt makes the country more dependent on growth to pay it back. This means increasing borrowing is fine as long as that increase goes towards more productive projects,” he said in an email.

“The government should be more transparent now and let Filipinos know where this is going to be used. Otherwise, we will end up paying the debt without benefiting from it,” he added.

The country’s debt to gross domestic product (GDP) ratio reached 62.1% at the end of the second quarter. This is higher than the debt-to-GDP ratio of 60% considered manageable by multilateral lenders for developing countries, and significantly higher than the 39.6% at the end of 2019 and 54.6% at the end of 2020.

The government aims to bring the debt ratio down to 61.8% by the end of the year and to 52.5% by 2028. – Luisa Maria Jacinta C. Jocson

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