Government debt surpasses P9-T in June on pandemic needs

MANILA, Philippines — Hefty loans secured to finance the Philippines' costly pandemic response pushed up the government's debt past the P9-trillion mark for the first time to hit a new record high as of June, the Bureau of the Treasury reported Wednesday.

Despite the economy restarting and some businesses reopening, the state's outstanding debt still inched up 1.8% month-on-month to hit P9.05 trillion last month, Treasury data showed. 

Since December last year, liabilities already accumulated 17.1%. By sources, 32% of the government's debt pile were from foreign creditors, although the bulk of 68% were borrowed locally.

While the government typically borrows to bridge a yearly deficit, this year's budget gap is expected to hit a record-high as debts replace revenues unlikely to be collected from shuttered businesses and stay-at-home consumers afraid to go out because of the outbreak.

As early as March, the Duterte administration embarked on a massive fund-raising activity to raise funding for public programs meant to counter the coronavirus disease-2019 (COVID-19) impact. Those borrowings have slowly trickled down to the government's balance sheet as liabilities.

Figures showed domestic obligations amounted to P6.19 trillion in June, up 2.6% compared to the previous month, primarily due to weekly issuances of government securities. Of that figure, P1.68 trillion was borrowed in the first six months.

Broken down, the government so far raised P1.06 trillion from regular issuances of Treasury bonds and bills and P310.77 billion from last February's retail Treasury bonds offer. 

T-bonds and T-bills are sold every week by the government to generate funds. The securities allow their holders to gain interest paid by the government for lending their money. In terms of maturities, T-bonds have longer payment terms than T-bills which are only payable within three, six or 12 months.

Apart from these local bond offerings, this year's domestic debt stock likewise included the P300 billion worth of Treasury securities bought by the Bangko Sentral ng Pilipinas to beef up the state's war chest against the outbreak. The amount is payable within three months, but can be renewed for another quarter.

Meanwhile, external liabilities jumped at a slower rate of 0.3% month-on-month to P2.86 trillion, of which P413.46 billion were incurred from January to June. 

In the first half, the government secured P11.09 billion project loans from foreign creditors and another P216.30 in program loans, which include P53.51 billion in concessional credit extended by multilateral lenders like the World Bank and Asian Development Bank to help fight the virus.

Proceeds from last April's global bonds sale added to the tally of offshore bond issuances that reached P186.06 billion, data showed.

For this year, the economic team expects revenues to shrink 16.7%, with the budget deficit, which indicates the government spends beyond its means, also expected to peak to P1.612 trillion this year. Deficits are funded by more debts.