Peso slump pushes up state debts to P12.09-T in February

MANILA, Philippines — The weak peso pushed the national government's outstanding debt levels up in February, according to the Bureau of Treasury.

Treasury data revealed that the total debt stock rose to P12.09 trillion, growing 0.5% month-on-month. Of the outstanding debt levels, 30.4% was sourced externally while 69.6% came from domestic sources.

Broken down, domestic borrowings reached P8.41 trillion in February, inching up 0.5% from the end-January levels. This included the issuance of domestic government securities of P44.89 billion then.

External debt inched up 0.5% month-on-month to P18.41 billion, expanding due in part to the weakening peso against the US dollar. The local unit has been trading at two-year lows in the past weeks as the country's import bill rises.

The latest figures reinforce warnings from global debt watchers about the unabated growth of government debts. By the end of 2021, state liabilities already accounted for 60.5% of the country’s gross domestic product, the highest ratio since 2005 and breaching the 60% threshold deemed manageable for developing economies.

"We expect the government to resort to more borrowings. One good thing to note is that in spite of the higher debt, the recent USD government bond issuance still had a very tight credit spread accepted by foreign investors," Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., said.

The government embarked on a borrowing spree in the past two years to fund its health crisis response, which included purchase of vaccines. Figures from the Budget department showed the Duterte administration is planning to borrow P3 trillion in 2022 to bridge its budget deficit, which would put the debt load at P13.4 trillion by the end of the year.

Nicholas Antonio Mapa, senior economist of ING Bank in Manila, said the government is in a precarious fiscal position, considering that the budget deficit is bound to further widen.

"The longer the country remains in the position the longer the Philippines will be susceptible to ratings action which would make financing even less affordable," Mapa said.