Government debt swells to record P13.5 trillion

MANILA, Philippines — The country’s debt jumped to a new record high of P13.52 trillion as of end-September amid the continued weakening of the peso against the dollar, breaching the government’s P13.43-trillion programmed obligations for 2022, the Bureau of the Treasury (BTr) said.

Month-on-month, the government increased the debt stock by 3.8 percent after it incurred an additional debt of P495.54 billion, largely due to the depreciation of the peso against the dollar, as well as the net issuance of government securities to support the national budget.

On a yearly basis, the debt pile jumped by 13.4 percent from the previous year’s P11.92 trillion.

In just three months in office of the Marcos administration, it has added P725.27 billion in new debt.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion said that overshooting the programmed debt level means that there was “overborrowing” somewhere.

“Nevertheless, I am more concerned with the equivalent spending because, usually, the absorptive capacity is a perennial challenge,” Asuncion told The STAR.

“The breach of the expected end-2022 debt target would mean more debt repayment in the future,” he said.

Leonardo Lanzona, economist and professor at the Ateneo de Manila University, argued that the latest increase in debt makes the country even more dependent on growth in order to repay its obligations.

Lanzona, however, said that the increase in borrowings is fine as long as the money is used for more productive projects.

“The government should be more transparent now and inform Filipinos where this is going to be used. Otherwise, we will end up paying for the debt without gaining any benefits from it,” he said.

Both Asuncion and Lanzona agreed that the current debt pile would eventually mean higher taxes to be imposed by the government.

Lanzona said new taxes should be expected, but this would only be sustainable if the country’s growth rate is higher than the interest rates of loans owed by the government.

Similarly, Asuncion maintained that the introduction of new taxes would take time.

“If the new administration wanted to implement new sources of revenues next year, it should have already worked for the passing of legislation pertaining to said new taxes,” Asuncion said.

“Maybe in 2024, they would, considering the tedious process of putting forward and implementing new sources of revenues,” he said.

Meanwhile, the Treasury said the majority or 68.8 percent of the debt pile came from domestic sources while the remaining 31.2 percent was sourced externally.

Total domestic debt at P9.3 trillion picked up by four percent on a monthly basis and jumped by 10.9 percent from the P8.39 trillion on a year-on-year basis.

Domestic debt has already increased by 13.8 percent to P1.13 trillion since the start of the year due to the continued preference for domestic financing to mitigate the effects of currency fluctuations.

External obligations, on the other hand, also increased by 3.4 percent to P4.22 trillion month-on-month and surged by nearly 20 percent from P3.53 trillion in the same period last year.

The Treasury said the increment in external debt was also due to the impact of local currency fluctuations against the dollar amounting to P179.69 billion.

This was partially offset by the P30.62 billion effect of third-currency depreciation against the dollar and net repayment of P10.8 billion.

Total debt guaranteed obligations inched up 1.1 percent to P397.22 billion due to the impact of local currency depreciation worth P9.27 billion, offsetting the net repayment of P1.43 billion.