Gov't debt fattens to P13.5-T in September amid weak peso

MANILA, Philippines — The country’s total debt stock fattened in September as the effect of a weak peso reared its ugly behind, adding strain to the national government’s fiscal deficit and making it difficult for the economy to outgrow borrowings.

Data from the Bureau of the Treasury released on Thursday revealed that government liabilities reached P13.52 trillion in September, rising 3.8% month-on-month. Of the outstanding debt levels, 68.8% came from domestic borrowings while 31.2% came from external creditors.

The debt pile's ascent was mainly due to the issuance of government securities and a weak peso, which can bloat the value of foreign debts. Since the beginning of the year, debts have piled up by 15.2% or P1.79 trillion.

Experts have been warning about the impact of a growing debt pile for the Philippines. The country’s debt stock climbed at the onset of the pandemic, due in part to the Duterte administration’s borrowing spree to fund its pandemic response. 

A plump debt stock would mean more taxpayers' funds are needed for debt servicing in the coming years. The situation also means that the Marcos Jr. administration would run the government and institute reforms with a very tight fiscal space.

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 emerging market economies.

Broken down, domestic borrowings rose 4% month-on-month to P9.3 trillion in September. The government issued P352.09 billion in securities to support its operations. 

External debt grew 3.4% month-on-month to P4.22 trillion. The impact of the weak peso came down to P179.69 billion. Since the start of the year, external debt rose by P658.3 billion due to foreign exchange fluctuations. 

“The increase in debt stock was expected as we continue to run budget deficits. The bigger question would be whether we can outgrow our debt to lower the debt-to-GDP levels,” Nicholas Mapa, senior economist at ING Bank in Manila, said.

“With the triple threat of surging prices, rising borrowing costs and elevated debt levels, posting stellar growth to outpace the rise in debt is becoming an even bigger challenge,” Mapa added.