NG debt rises to record 12.76 trillion pesos

The NATIONAL (NG) government’s outstanding debt rose to a record high of 12.76 trillion pesetas in late April as it continued to increase borrowing to support the economic recovery from the pandemic.

Preliminary data from the Bureau of the Treasury (BTr) showed that outstanding debt rose 0.7% from 12.68 trillion pesos at the end of March, “due to net issuance of government bonds to local and external lenders and the depreciation of the local currency versus the US dollar.”

Year-on-year, the debt rose 16.1% from 10.99 trillion pesos.

According to BTr, the debt mountain has increased by 8.8% year-to-date after the government borrowed another 1 trillion pesos.

Of the outstanding debt, the majority, or 70%, was raised domestically, with the remainder originating from foreign creditors.

The domestic debt stood at P8.94 trillion pesos at the end of April, up 0.8% from the end of March on net domestic borrowing of P66.3 billion pesos. This was 14.4% higher than 7.8 trillion pesos a year earlier and 9.4% higher than the end-December 2021 level of 8.17 trillion pesos.

Treasury bonds still accounted for most of the domestic debt stock at 8.64 trillion pesos in April, up 18.8% yoy and 0.8% mom.

Meanwhile, outstanding foreign debt rose 20.4% year-on-year to 3.83 trillion pesos at the end of April. It was up 0.4% month-on-month and up 7.6% from where it was at the end of December 2021.

“For the period, the increase in external debt was due to net borrowings of 28.56 billion pesos and the impact of peso depreciation against the US dollar of 31.5 billion pesos. This was mitigated by P43.86 billion in third-currency adjustments,” the Treasury said.

The national government’s guaranteed debt rose 0.6%m/m to Ptas 413.43 billion at the end of April on net calls on domestic and foreign guarantees.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the record level of debt reflected government bonds issued ahead of the election to fund infrastructure projects, support fuel subsidies and other pandemic response programs.

“Given the series of record highs in government debt outstanding in recent months, the ramped-up tax collections from existing tax laws may not be enough and would inevitably require new tax/tax reform measures to curb additional government borrowing/debt. especially for the incoming administration,” he added.

Institute for Leadership, Empowerment and Democracy (iLEAD) executive director Zy-zya Nadine Suzara said the higher debt could be due to the outgoing government’s infrastructure push.

“It is difficult to say whether the ongoing external problems have affected the country’s debt, particularlyEspecially since most of the new debt acquired in March-April 2022 was domestic,” she said in a Viber message. “Only higher oil prices and general uncertainty have helped push up the need for cash… It’s more plausible that the government is really short on cash to fund the rest of the year’s programs.”

Ms Suzara said the debt is expected to rise further as the government is unable to generate enough revenue.

“To plug the budget deficit, total financing needs from domestic and external sources are expected to reach 2.2 trillion pesos. So far, the Treasury Department’s cash operations report shows it already totals around 1.2 trillion pesos by the end of April 2022,” she said. “Unless the next government streamlines the current budget program, we can expect another approximately 1 trillion pesos by the end of the fiscal year on top of the current outstanding debt.”

Bank of the Philippines chief economist Emilio S. Neri said the debt would pose a major challenge for the new Marcos administration.

“The new group of economic executives is highly competent, and if they can get our politicians to swallow bad pills to help us execute a solid fiscal consolidation plan, we may be able to reverse the deteriorating debt metrics,” he said in a Viber -News .

President-elect Ferdinand “Bongbong” R. Marcos, Jr. has appointed Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno as Chief Treasury Officer.

Mr Diokno has said he is not in favor of raising taxes, even with the debt at a record high.

“For me, it’s important to let the economy grow, focus on tax administration first and improve collection,” he previously told ABS-CBN News Channel. — Bernadette Therese M. Gadon