Government debt piles up to P6T

MANILA, Philippines – Higher issuance of government securities and declining peso value pushed the debt pile of the National Government to nearly P6 trillion last year, the Bureau of the Treasury reported yesterday.

Total liabilities reached P5.954 trillion by the end of December 2015, up 3.8 percent from the previous year. On a month-on-month basis, NG debt inched up by 0.03 percent.

Domestic debt rose 1.7 percent to P3.88 trillion while foreign obligations increased 8.1 percent to P2.07 trillion.

“A challenging external environment calls for consistent discipline in making sure productive debt works in our favor,” Finance Secretary Cesar Purisima said in a statement.

The government incurs debt when it borrows from both the local and foreign markets to finance its budget deficit. It also seeks funding to settle existing debts.

According to Treasury data, the increase in local debts came entirely from higher Treasury bills and bond issuances made every two weeks last year.

The government issued a total of P3.88 trillion worth of bonds last year, slightly higher than the P3.82 trillion recorded in 2014.

External obligations rose across the board due to increased loans to state agencies as well as the value of foreign bond issuances.

Direct loans reached P767.51 billion, up 12.3 percent year-on-year.

Foreign bonds amounted to P1.3 trillion or an increase of 5.8 percent.

“This was due to the combined effect of net availments...and peso depreciation as dollar- and third currency-denominated debt gained,” the Treasury said.

The peso declined by about five percent last year against the greenback, making debts in that currency more expensive. A similar trend could be noted for other units such as the euro and pound.

The bulk of offshore securities were dollar-denominated at P1.11 trillion.

Despite the rise in absolute values, Purisima said the country’s debt profile remains healthy when measured as a proportion of gross domestic product (GDP).

The debt-to-GDP ratio, which reflects how fast the economy generates resources to settle obligations, fell to 44.8 percent from 45.4 percent in 2014.

While there is no ideal measure, governments usually try to limit the ratio to 50 percent or lower.

“The Philippines is fully committed to a proactive liability management strategy to keep our debt structure resilient,” Purisima said.