Philippines debt pile rises to record P14.2 trillion

MANILA, Philippines — The country’s outstanding debt inched up to reach a fresh record of P14.24 trillion as of end-July following additional domestic borrowings to fund state financing requirements.

This marked a slight increase of 0.7 percent from P14.147 trillion the previous month. On a yearly basis, however, the debt stock picked up by 10.5 percent from P12.887 trillion.

For July alone, the government added some P96.44 billion in fresh obligations primarily due to the net issuance of domestic securities.

The current debt pile is also about 97.4 percent of the expected P14.62 trillion debt by end-2023.

Based on government estimates, the growth of the national debt will slightly slow, but the country’s total obligations will still balloon to a record P15.84 trillion by next year.

Economists have warned that debt-to-GDP ratios could inch up against a backdrop of a slowing economy, which could get the attention of ratings agencies.

More tax revenue collections and other reform measures are seen helping the government lessen its dependence on borrowings as additional revenue streams would significantly contribute to fiscal consolidation.

Under the government’s fiscal framework, proposed tax measures include the remaining packages under the Comprehensive Tax Reform Program of the Duterte administration.

The economic team is also moving to impose value-added tax on digital service providers, excise taxes on single-use plastics, and excise taxes on pre-mixed alcohol.

Additional revenue-generating measures also include the imposition of higher excise taxes on sweetened beverages and salty food, rationalization of the motor vehicle road user’s tax, and reforms to the mining fiscal regime.

To complement these, the government is pursuing expenditure reforms, such as the rightsizing program and the reforms in the military and uniformed personnel pension system to widen the fiscal space.

The Bureau of the Treasury said the majority or 68.9 percent of the debt pile comprised domestic borrowings while the remaining 31.1 percent was sourced externally.

Total domestic debt reached P9.81 trillion, up 1.1 percent on a monthly basis and 11.1 percent from the same month last year.

For the month, domestic debt grew by P109.54 billion due to the net issuance of government bonds driven by the state’s financing requirements.

This offset the P850 million effect of local currency appreciation against the US dollar on onshore foreign currency-denominated securities.

External obligations, on the other hand, decreased by 0.3 percent to P4.43 trillion month-on-month. It rose 9.3 percent from P4.055 trillion on a yearly basis.

The Treasury said the reduction in external debt was due to the effect of peso appreciation against the US dollar amounting to P42.87 billion.

This more than offset the P9.97 billion net impact of third-currency fluctuations against the US dollar and P19.81 billion net availment of foreign loans.

Meanwhile, total debt guaranteed obligations went down by 1.7 percent to P363.39 billion due to the net repayment of both domestic and external guarantees amounting to P5.3 billion and P210 million, respectively.