Gov’t debt hits record P12.03T

The National Government’s outstanding debt hit a record P12.03 trillion at the end of January after it got another zero-interest loan from the central bank and borrowed locally, according to data from the Treasury bureau. 

The end-January debt level rose by 16.5% from a year earlier and by 2.6% from December

About 70% of the debt stock were obtained locally, while the rest came from overseas. 

Domestic debt rose by 2.4% to P8.37 trillion from a month earlier and by 14.2% from a year ago. 

In a stateent, the Treasury bureau traced the monthly increase to domestic borrowings worth P197.04 billion, including P300 billion in provisional advances from the Bangko Sentral ng Pilipinas (BSP). 

The zero-interest loan from the central bank is lower than a similar loan it got earlier worth P540 billion. This reflects the central bank’s gradual policy normalization as the economy recovers from a coronavirus pandemic, the BSP said. 

Outstanding government securities fell by 1.3% from a month earlier to P8.067 trillion and rose by 18.9% from a year earlier. 

The external debt stock stood at P3.661 trillion as of end-January, up by 2.9% from December and by 22% from a year earlier. 

“For January, the increment in external debt was attributed to the impact of peso depreciation against the dollar amounting to P11.23 billion and the net availment of external obligations amounting to P94.88 billion,” the Treasury bureau said. 

These were partially offset by adjustments in other foreign currencies worth P2.37 billion, it added. 

Tax reforms should help the country’s fiscal sustainability amid its rising debt, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. 

“There is a need to further increase tax revenue collections to keep the budget deficit and the country’s debt at sustainable levels,” he said in a Viber message. 

The country risks its credit rating being lowered due to rising debt, ING Bank-NV Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail. 

“The Philippines remains susceptible to possible ratings action for as long as debt levels remain at precariously high levels — anything above 60% of the gross domestic product,” he said. “Furthermore, according to Fitch Ratings, we may need to demonstrate the ability to gradually lower debt to more acceptable levels.” 

Last month, Fitch Ratings kept the country’s investment grade “BBB” rating, while keeping a negative outlook. This means its credit rating could be lowered in the next 12 to 18 months. 

Mr. Mapa noted that while much of the country’s outstanding debt is in pesos, the currency’s depreciation against the dollar could make borrowings more costly.  The peso closed at P51.74 a dollar on Friday. 

SOURCE: Business World Online

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Gross borrowings hit P2.58 trillion in 2021

GROSS BORROWINGS by the National Government from domestic and external sources hit P2.58 trillion in 2021, as it continued to finance its pandemic response, data from the Bureau of the Treasury (BTr) showed.

The bureau’s most recent cash operations report showed that total borrowings slipped by 5.9% year on year to P2.58 trillion as of end-December 2021.

Local debt accounted for 78% of this total, while the rest was sourced from foreign creditors.

In December alone, total gross borrowings resulted in a net redemption of P196 billion, which means debts paid back were larger than new borrowings.

Total gross domestic debt that month resulted in a net redemption of P236 billion. This was smaller than the P465-billion net redemption logged in the same month the previous year.

The BTr raised P360 billion from retail Treasury bonds in December, while there was a net redemption of Treasury bills worth P56 billion.

It repaid P540 billion to the central bank for its advances.

Meanwhile, gross external borrowings in December reached P39.86 billion, down nearly 75% year on year.

The government that month took out P13.74 billion in new project loans and P26.12 billion in program loans from foreign sources.

FULL-YEAR 2021

Breaking down total gross borrowings for the year, local debt accounted for P2.01 trillion of the total, inching up by 0.59% year on year.

Broken down, the bulk of local gross borrowings were sourced from fixed-rate Treasury bonds that amounted to P1.26 trillion. Another P823.35 billion came from retail Treasury bonds. Meanwhile, retail onshore dollar bonds reached a total of P80.84 billion.

Treasury bills resulted in a net redemption of P153.34 billion.

Meanwhile, gross external borrowings hit P568.67 billion, slipping by 23.4% year on year.

Broken down, the bureau raised P146.17 billion from global bonds, P121.97 billion from euro-denominated notes, and P24.19 billion in Japanese yen-denominated securities.

The government also recorded P166.1 billion in program loans along with P110.24 billion in project loans.

The government borrows from local and foreign sources to finance a widening budget deficit after the coronavirus pandemic stalled the economy and pulled down tax collections.

Outstanding debt reached a record P12.03 trillion at the end of January this year after it took out another zero-interest loan from the central bank and borrowed locally.

The National Government’s debt level increased by 16.5% year on year. — Jenina P. Ibañez

SOURCE: Business World Online

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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

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