Debts becoming less of a burden, says finance chief

MANILA, Philippines - Debts are becoming less of a burden to the national government as data showed favorable metrics in terms of payment terms, denomination and even the amount being shelled out for settlements.

“We have done that,” Finance Secretary Cesar Purisima said in a recent interview when asked if the government was able to achieve its “four pillars” of liability management when it took over.

Since 2010, Purisima has consistently outlined the thrust of the national government when it comes to liabilities.

He cited four things the administration wants to do namely reduce foreign debts, lengthen payment terms, lower interest payments and reduce bunching ups of maturities.

As of the third quarter this year, Bureau of the Treasury data showed the government is succeeding.

Of the total P5.93 trillion liabilities, 67.2 percent are denominated in pesos, while only 32.8 percent are in foreign currencies. That translated to P3.98 trillion and P1.94 trillion, respectively.

Cayetano Paderanga Jr., an economist at University of the Philippines-Diliman, said in an e-mail the data showed the country’s “leverage ratios are very healthy.”

Lower foreign debts indicate the government will not suffer as the peso declines in value. A weaker peso, which has lost around five percent against the dollar this year, increases the value needed to settle foreign debts.

Aside from low foreign exposure, 92.1 percent of debts have fixed interest rates as of September, and only 7.7 percent have floating rates. A meager 0.13 percent are interest-free obligations.

“The fixed rates will buffer us from significant part of interest rate hike,” Paderanga said, pertaining to the expected rate adjustments by the US Federal Reserve next month.

The US is highly seen to raise rates for the first since 2006 by December, owing to sustained recovery after the 2008 financial crisis. This, in turn, is expected to push up yields in emerging markets like the Philippines upwards.

Despite this, Purisima earlier said the government still “has room” to lower rates further because of its good credit ratings and strong economic performance.

Bulk of state obligations are also payable for more than 10 years. Figures showed 88.8 percent of debts are “long-term” in nature. Only 4.7 percent are payable in a year’s time, while the remaining 6.4 percent are “medium-term” debts.