Peso rebound cuts government debt

MANILA, Philippines — The strengthening of the peso against the dollar last month helped slash the government’s debt pile, the Bureau of the Treasury (BTr) reported over the weekend.

Data showed the national government’s outstanding debt went down to P6.44 trillion as of end-November, one percent or P63.85 billion lower than the previous month’s level of P6.5 trillion.

“Net repayments and a stronger peso contributed in lowering the end-month value of the debt,” the Treasury said in a statement.

The peso appreciated to 50.346 to $1 in November from 50.686 to $1 in October. The peso, dubbed as the worst performing currency in the region, depreciated by as much as 4.1 percent to hit a fresh 11-year low of 51.77 to $1 on Oct. 25.

The local currency has since recovered, depreciating by only 0.42 percent to end the year at 49.93 to $1 last Friday from the 2016 closing of 49.72 to $1 amid strong inflows as well as remittances from Filipinos abroad.

Of the total debt pile, more than 65 percent came from domestic sources, while the remaining 35 percent came from foreign borrowings.

The government’s domestic debt declined P7.85 billion to P4.21 trillion as of end-November due to net redemption of government securities and diminution of the peso value of onshore dollar bonds, according to the BTr.

Likewise, the Treasury said the government’s external debt was reduced by P56 billion or 2.5 percent to P2.23 trillion due to the combined effect of peso appreciation and net repayments.

It said the strengthening of the local currency lowered the peso value of external debt by P59.24 billion and net repayments by P5.61 billion.

The reduction, the Treasury said, was tempered by third-currency appreciation against the greenback amounting to P8.85 billion.

Meanwhile, data from the bureau also showed government borrowings jumped 62 percent to P528.98 billion in the first 11 months from P325.95 billion in the same period last year due to the issuance of more retail treasury bonds (RTBs).

Data showed total domestic borrowings jumped 41.95 percent to P500.31 billion from January to November compared to a year-ago level of P352.45 billion.

The government issued P181.85 billion worth of RTBs this year compared to last year’s P100.04 billion. It also issued more treasury bills and treasury bonds this year.

On the other hand, foreign debt went up 14.2 percent to P163.99 billion in the first 11 months from P143.62 billion in the same period last year.

The government borrows from both local and foreign creditors to pay maturing debt and finance its budget deficit. The Duterte administration has pegged the budget deficit ceiling at three percent of the country’s gross domestic product.