NG debt inches up to P5.9T in Jan-Aug

MANILA, Philippines – In line with the Aquino’s administration’s thrust, the government’s debt metrics continued to improve in August, Bureau of the Treasury data showed.

As earlier reported, the national government debt inched up 0.9 percent to P5.898 trillion for the first eight months. By currency distribution, 67.2 percent were in pesos, while the remaining 32.8 percent were in foreign denominations.

External liabilities were further classified into different currencies. Bulk of the debt, accounting for 74.6 percent, were in the US dollars, 14.4 percent in Japanese yen, 6.4 percent in so-called global pesos, 2.7 percent in euros and 1.9 percent in other units.

Global pesos are debts issued in local currencies, but are settled in foreign units, normally US dollars.

Nicholas Antonio Mapa, economist at the Bank of the Philippine Islands, said the state’s preference to local debts “insulates the country” for the threat of the upcoming interest rate hike in the US that could lower emerging market currencies.

Less foreign liabilities mean the country is least affected by foreign exchange drops from capital flight once investors get attracted back to the US, the world’s safe haven. Weaker currencies mean more local units needed to settle debts. The peso has lost around four percent of its value since the end of last year.

“Nobody’s going to be spared from the interest rate hike since there will definitely be a shift across currencies,” Mapa said in a phone interview.

“But at least three countries— Vietnam, India and the Philippines— could experience much less severe episodes of capital flight,” he added.

In addition, around 92.15 percent of state debts have fixed interest rates, meaning charges will stay put even once local interest rates rise as they follow their US counterparts.

Only 7.71 percent were in floating interest, while the remaining 0.14 percent were interest free, Treasury figures showed.

“It means any subsequent rate hike will not affect the nature of our debts since we were able to lock in rates that are favorable to us,” Mapa explained.

By maturities, the government also secured itself more time to settle most of its liabilities.

As of August, 88.4 percent of the debts were payable over the long-term or more than 10 years. Medium-term obligations accounted for 6.8 percent, while short-term payables cornered 4.8 percent.

Since 2010, the Aquino government has embarked on a number of liability management transactions that effectively lower the government’s interest payments by lengthening payment terms and reducing foreign debt exposures.

This has reduced debt payments as a proportion of the budget and freed up more resources to finance state projects and programs.