Pandemic funding bloats gov't debt to new record high in April

MANILA, Philippines — The government continued to accumulate more debts in April to hit a new peak, driven by fresh borrowings at home and abroad to fund the country’s ballooning pandemic expenses.

What’s new

The state’s outstanding liabilities grew 2.0% month-on-month to P10.99 trillion in April, the Bureau of the Treasury reported Thursday.

Year-to-date, obligations accumulated by 12.2%, figures showed.

Why this matters

When the pandemic hit home, the Duterte administration was forced to raise cash as fast as it can to fund a costly pandemic response. Since then, borrowings have been one of the government’s go-to sources of cash, as tax collections remain less reliable amid a prolonged recession.

Economic managers project the budget deficit, as a share of the economy, to surge to 9.4% in 2021 from their original projection of 8.9% on expectations of higher state spending on coronavirus programs following an unexpected spike in cases. This, in turn, would require more borrowings.

What the government says

In a statement, the Treasury attributed the uptick in liabilities last month to "net availment of both local and external financing" as well as currency fluctuations that bloated the value of offshore obligations. Specifically, proceeds from the government’s recent global bonds sale have been added to the total debt pile.

What an analyst said

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., believes the country’s bloating pandemic bill would continue driving the growth of debt.”The need to finance the purchase of more COVID-19 vaccines would also lead to some pick up in government borrowings, as the commercial purchases for COVID-19 vaccines would be recurring in nature in the foreseeable future,” Ricafort said in an e-mailed commentary.

Other figures

• Of the total debt stock, 28.9% was sourced externally while 71.1% are domestic borrowings.
• Onshore debts inched up 0.9% month-on-month to P7.8 trillion in April due to issuance of government securities like Treasury bonds and bills, which are auctioned regularly. Since the beginning of the year, local liabilities piled up by 16.7%.
• Foreign debts, meanwhile, picked up a bigger 4.9% from the preceding month to P3.2 trillion in April, putting the year-to-date offshore obligations up by 2.5%.