MANILA, Philippines — The government’s debt load continued to pile up in August to hit a record high, as the state ramps up its borrowings to make up for dismal revenues amid a pandemic-induced economic weakness.
What’s new
The state’s outstanding liabilities stood at P11.64 trillion in August, up by 0.27% month-on-month, the Bureau of the Treasury reported Thursday,
Since the beginning of the year, obligations have accumulated by 18.9%.
Why this matters
Since the pandemic hit home last year, the Duterte administration has been on a borrowing spree to plug a widening budget deficit, which is forecast to hit P1.86 trillion this year — equivalent to 9.3% of gross domestic product.
Debts will continue to build up as the Philippines’ pandemic needs grow, all while revenue collection remains anemic because of protracted economic weakness. Already, economic managers expect the government’s outstanding obligations to hit P11.73 trillion by the end of the year, before growing to P13.42 trillion by end-2022, when a new administration would have taken over.
As a share of the economy, obligations for this year are forecast to go up to the 60% threshold where debt watchers begin to worry. It is only in 2023 when debts are expected to “start its downtrend”, economic officials said.
What an analyst says
Sought for comment, Nicholas Antonio Mapa, economist for ING Bank in Manila, warned that the Philippines would likely see its first credit rating downgrade in 16 years if the pandemic continues to weigh on the state’s balance sheet.
“I flagged the breach of the debt-GDP ratio as early as March. As we know, the 60% threshold is a key statistic monitored by debt watchers. Despite having a hefty amount of cash simply parked at the BSP, BTr continues to borrow and we’ve seen debt piling up as revenues have yet to improve given the lackluster growth outlook,” Mapa said in an e-mail exchange.
“We maintain our expectation for ratings action on the Philippines in the next 9 months should this current predicament deteriorate further,” he added/
Other figures
- Of the total debt stock as of August, 70.6% was from domestic sources while 29.4% came from external creditors.
- Domestic liabilities grew 1.2% month-on-month to P8.22 trillion mainly due to continued sale of government securities like Treasury bonds and bills.
- The government owes P3.42 trillion to offshore creditors as of August, down 2% month-on-month due to net repayment of foreign loans amounting to P34.22 billion.