Gov't caps 2021 with P11.73-T debt, nearly hitting alarming levels

MANILA, Philippines — The national government's outstanding debt settled within the Duterte administration’s borrowing program for 2021, although they nearly hit alarming levels as the country's pandemic bill grows.

Data from the Bureau of Treasury released Tuesday showed the national government accumulated debt totalling P11.73 trillion in 2021, up 19.7% year-on-year.

The latest tally matched the Duterte administration’s debt program for 2021, which was breached a few times last year before finally easing as the government tempers spending to avoid incurring a bigger budget deficit. But as a share of the economy, those liabilities ballooned to 60.5% last year, bigger than 54.6% share recorded in 2020 and slightly above the 60% threshold that credit rating agencies consider manageable.

"The debt-to-GDP ratio was… still within the accepted sustainable threshold as the economy continues to recover from the effects of the pandemic," the Treasury said.

Broken down, domestic debt levels for the entire year grew 22% year-on-year to P1.47 trillion in 2021, due to the government's preference to borrow more from domestic sources to mitigate foreign exchange risk and support local capital markets. Of the total debt stock, 69.7% was borrowed onshore.

External debt, on the other hand, rose 14.8% year-on-year to P457.82 billion last year. The treasury department noted 6.6% of that increase was due to the depreciation of the peso.

While these debt levels might alarm some observers, the mammoth effort of borrowing trillions of pesos were necessary for the country's survival from the pandemic. Some of the borrowed funds were used to fund cash handouts amid harsh pandemic curbs that forced millions of Filipinos into unemployment.

The Duterte administration set a budget deficit limit of 8.2% of GDP for 2021.

In an emailed commentary, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. said he expected the government to increase borrowings in the aftermath of typhoon “Odette”, which swept the country days before Christmas last year.

"However, reconstruction/rebuilding/rehabilitation activities, especially in areas hit hard by Typhoon Odette, could temporarily increase the government’s expenditures and widen the budget deficit that would entail more borrowings and higher overall debt in the coming months," Ricafort said.