Philippines debt hits record P14.6 trillion

Louise Maureen Simeon - The Philippine Star
Philippines debt hits record P14.6 trillion
Stock photo of a peso money bill.
Philstar.com / Jovannie Lambayan, file

MANILA, Philippines —   The Marcos administration has so far incurred P1.82 trillion in debt since it assumed office, largely due to a high interest rate environment, pushing the country’s outstanding obligation to an all-time high of P14.62 trillion in 2023, according to the Bureau of the Treasury.

The latest figure was also 8.92 percent higher than the end-2022 debt of P13.42 trillion.

This means that since the Marcos government started in July 2022, it has borrowed a total of P1.82 trillion in 18 months.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion explained that such a level was significantly impacted by elevated interest rates globally.

Central banks here and abroad were on a hiking spree from 2022 until last year amid the need to tame inflation and stabilize currencies.

In the Philippines, the Bangko Sentral ng Pilipinas jacked up key interest rates by 450 basis points, making it the most aggressive central bank in the region.

“A high interest rate environment is really challenging because you also need to address rising inflation. We also came from COVID and there is a lot of pandemic-driven debt,” Asuncion said in a Viber message.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., added that higher debt servicing costs since the Russia-Ukraine war and increased national budget deficit also contributed to the current debt level.

Moving forward, Ricafort said the debt could still hit new record highs for as long as there are budget deficits that need to be financed by the government.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., added that debt could remain in an upward trend to fund the government’s massive infrastructure push.

Asuncion emphasized that the government would likely continue to consolidate and carefully tread the fiscal landscape, making sure that the Philippines maintains its sovereign credit ratings.

Following the 5.6 percent gross domestic product (GDP) growth in 2023, the share of national debt to the country’s output eased to 60.2 percent and is about to break below the internationally accepted threshold.

This is the same level in the previous quarter, but was an improvement from the 60.9 percent debt-to-GDP ratio in 2022. It is also lower than the 61.2 percent target set under the medium-term fiscal framework.

The current debt-to-GDP ratio is now just slightly above the internationally accepted threshold of 60 percent. Reducing the ratio means that economic growth should outpace the level of borrowings of the Philippines.

“That is the goal, but there is still spending that needs to be done. If GDP expansion in 2024 does better than 2023, we may see a better debt-to-GDP ratio,” Asuncion said.

“It could ease if we maintain growth between 5.5 and 5.8 percent,” Ravelas added.

Apart from faster economic expansion, Ricafort noted that tax reform measures that could increase the structural and recurring sources of tax revenues as well as more disciplined government spending are necessary to make fiscal and debt management sustainable over the long term.

“At some point, new taxes and higher taxes could be needed in view of the need to pay the relatively large amount of debts incurred since the pandemic,” Ricafort said.

For December alone, the government added P107.54 billion to the debt pile due to the net availments and exchange rate adjustments.

The Treasury said domestic borrowings accounted for a majority or 68.5 percent of total debt pile while the remaining 31.5 percent came from exteral sources.

Total domestic debt at P10.02 trillion slightly went down by 0.06 percent on a monthly basis due to the net redemption of government securities. However, it jumped by 8.79 percent from the P9.21 trillion in debt in end-2022.

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