Government trims debt to P12.5 trillion in May  

MANILA, Philippines —  A month before it left office, the Duterte administration managed to bring down its outstanding debt to P12.5 trillion as of end-May, but the new administration will still be in a tight fiscal spot. Latest data from the Bureau of the Treasury showed that the national debt declined by 2.1 percent to P12.49 trillion as of end-May from the record-high of P12.76 trillion a month ago.

On a yearly basis, however, the national debt increased by 12.87 percent from the May 2021 level of P11.07 trillion.

The Treasury said the reduction in total debt was due to repayment of provisional advances from the Bangko Sentral ng Pilipinas.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the month-on-month decline in the government’s outstanding debt may be attributed to the net debt payments and no large borrowings usually during the election month.

He said the government might have done some frontloading of borrowings before the elections as a matter of prudence and policies of poll-related restrictions.

Ricafort said the continued economic reopening that resulted in increased tax revenue collections contributed to the reduced need for more government borrowings in May.

He said as the decline in debt is still small, the Marcos administration would have to pursue fiscal consolidation in order to pay off the government’s financial obligations.

The national debt, when measured against the gross domestic product, soared to a 17-year high of 63.5 percent as of the first quarter.

The Philippines would have to bring this down to below the international threshold of 60 percent in the years ahead to prevent a credit rating downgrade.

“The new administration needs to further increase tax revenue collections from existing tax laws, or even come up with new taxes or even higher tax rates, in order to help pay the total of P5 trillion increase in outstanding debt since the pandemic started,” Ricafort said.

“The government may also intensify fiscal discipline or even austerity measures on government spending through anti-corruption and anti-leakage measures,” he said.

The administration is also urged to adopt an investment approach on government spending in terms of prioritization such as on education, health and infrastructure, that could boost economic productivity.

Further, the Treasury said the majority or 69.3 percent of the debt pile came from the domestic market and the remaining 30.7 percent was sourced externally.

Domestic debt dipped by three percent to P8.67 trillion in May from a month earlier, but this still posted a 9.5 percent jump from the May 2021 level of P7.92 trillion.

This resulted from the P300-billion repayment to the central bank, which was partially tempered by the net issuance of government securities.

External obligations, on the other hand, were almost flat at P3.83 trillion month-on-month, but surged 21.4 percent from P3.16 trillion in the same period last year.

The Treasury said the increment in external debt was due to the impact of local and foreign currency fluctuations against the dollar amounting to an additional P5.63 billion and P9.41 billion, respectively.

Meanwhile, total debt guaranteed obligations went down by 3.3 percent to P399.72 billion due to the net repayment of both domestic and external guarantees.