Regulators admit PH’s rising debt is a problem

 Concerns have been deepening about the ballooning debt in the Philippines.

A massive increase in debt aggravates the problem of debt servicing.

Financial regulators have finally acknowledged the problem that the country’s rising debt has created, saying economic growth will not be enough to address it.

“Debt servicing is the primary risk at this juncture,” the Financial Stability Coordination Council (FSCC) said in its first semester report.

According to the FSCC, the Philippines’ small, open economy leaves it exposed and servicing its debt could be a challenge.

“As a small open economy, the Philippines is a price-taker in the global market and the current path of those global prices exerts added pressure on the Philippines and its recovery. If risk premiums rise, it makes it harder to stabilize from the disruptions of COVID19,” the report said.

“Debts will be more expensive to service (raising even further risks of default) and an abruptly weaker local currency makes the higher currency exposures more costly to carry. All other risks are manageable at this juncture but will require continuous monitoring and updating,” it added.

The FSCC is made up of the Bangko Sentral ng Pilipinas, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corporation, and the Securities and Exchange Commission.

It noted the loss of income and business opportunities because of the pandemic and its effect on the country’s debt considering that the schedule of payments was premised on growth projections made before the COVID19 pandemic erupted.

“Growth will eventually be the norm which will alleviate the income compression, but the timing and terms of the debt repayment cannot be addressed by growth alone,” the report said.

Fitch Ratings recently changed its outlook on the Philippines to negative because of increasing risks to its credit profile.

Philippine government debt stood at P11 trillion from P5.95 trillion at the end of June 2016 and this doesn’t include the P9 trillion obligations arising from unpaid military pensions.

The Financial Stability Report examined 11 risks and debt servicing or what it terms as leverage risk.

Risks to the macroeconomy, valuations, monetary and fiscal policy, liquidity and geopolitical are also under continuous monitoring.

SOURCE: Bilyonaryo

Categories: philippine debt