Pandemic costs bloat gov't debt to new record-high in March

MANILA, Philippines — The government continued to accumulate more debt in March to a new record-high, as the country’s needs amid the lingering coronavirus pandemic grow.

What’s new

The state’s total outstanding debt climbed 3.5% month-on-month to P10.77 trillion as of the first quarter, the Bureau of the Treasury reported Monday. The uptick means P368 billion was added to the government’s debt load from February to March.

From end 2020 level, state obligations have now increased by a tenth. For all of 2020, liabilities soared over 26% year-on-year after lockdowns increased public needs that government had to finance amid a declining revenues.

Why this matters

With tax collections still drying up due to weak economic activity, the Duterte administration has chosen to turn to debt not only to fund costly pandemic programs, but also to bridge a widening budget shortfall. 

For this year, the Cabinet-level Development Budget Coordination Committee, which sets macroeconomic targets, has programmed a record budget deficit of P1.78 trillion, equivalent to 8.9% of gross domestic product.

What the government says

In a statement, the Treasury attributed the surge in obligations to “net issuance of government securities,” meaning the government sold more bonds than it redeemed or completely settled. To recall, the government raised P411.79 billion from the sale of retail Treasury bonds in March.

What analysts say

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said government debt is not yet done increasing. “The need to finance the purchase of more COVID-19 vaccines would also lead to some pick up in government borrowings/debt; as the commercial purchases for COVID-19 vaccines would be recurring in nature in the foreseeable future," he said in an emailed commentary.

By the figures

• Of the total debt stock as of March, 72% was sourced onshore while the remaining 28% came from external creditors.
   
• Domestic liabilities rose 5.2% month-on-month in March to P7.74 trillion, bringing the year-to-date tally up by 15.7%.
   
• External debts inched down 0.4% month-on-month to P3.03 trillion, thanks to a weak dollar that more than offset the addition of P15.15-billion new foreign loans in March. Since the end of 2020, offshore liabilities are down by 2.3%.