Government debt inches up to P5.85 T in July

MANILA, Philippines - National government debt went up slightly to P5.85 trillion as of end-July from P5.82 trillion as of end-June, Bureau of the Treasury data showed.

But the average debt maturity or payment period remained long at 9.81 years with longer term payments for foreign debts, according to separate figures from the Department of Finance.

The Philippines borrows from both domestic and foreign markets to bridge its budget deficit programmed to hit P284 billion this year. As of July, however, the budget gap – the difference between expenditures and revenues – amounted only to P18.5 billion.

Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, said while the country is “historically, in a better footing” on its debts, dangers abound as the peso continues to depreciate in value.

“The foreign debt component is likely to increase as the peso falls. Despite our borrowing preference being tilted toward the domestic market, it remains to be seen if that is enough to prevent us from having difficulties managing the debt,” Neri said in a phone interview.

 Domestic debts accounted for the bulk of government liabilities as of July, cornering 66 percent or P3.859 trillion. Meanwhile, foreign liabilities reached P1.988 trillion, 37 percent of the total debt pile.

According to the BTr, the slight rise in government debt was a result of a combination of larger issuance of government securities and the “depreciation of the peso against the dollar” during the period.

In July, the peso averaged 45.265 to a dollar, weaker than the 44.688 recorded by the end of 2014, central bank figures showed. A weaker peso makes it more expensive to settle foreign liabilities.

Despite the increase though, foreign debts have a longer average residual maturity of 11.54 years, so far the longest since the Aquino administration took over in 2010.

Peso-denominated debts, on the other hand, have an average maturity of 8.79 years.

“It is indeed good that these debts have longer payment terms, but what is more important is our exposure. I guess, you can say that the government succeeded in lowering our exposure, but it remains to be seen if we will not have any problems soon,” Neri said.

Since 2010, the Aquino admi-nistration has moved to lower the government’s foreign debt by borrowing more locally. For 2015, 86 percent of debts are programmed to be sourced locally, and only 14 percent overseas.

In addition, the government has also embarked on various liability management exercises to lengthen its maturities and free up funds to finance public projects.

For instance, its most recent debt exchange concluded last Monday, is seen to lengthen payment terms by an average of 10.57 years for participating 10-year and 25-year bonds.