Gov't debt hits P5.96T in October

MANILA, Philippines - The debt pile of the Aquino administration nears the P6-trillion mark as of October and may increase further, but analysts said it remains sustainable when compared to how the economy is generating resources to settle them.

The national government debt hit P5.958 trillion for the first 10 months, up 0.4 percent from end-September and 4.3 percent from same period last year, the Bureau of the Treasury reported on Wednesday.

Broken down, domestic liabilities totaled P3.898 trillion, while their external counterparts reached P2.06 trillion. Both were up 3.8 percent and 5.2 percent, respectively, from last year.

Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, said liabilities could increase in the coming months as the government borrows more for next year.

“There could be catch-up on borrowings in the coming months to finance the upcoming obligations or upcoming payments of the national government. That could build up quite fast,” Neri said in a phone interview.

He noted that for the past months, the government has rejected bids on local Treasury auctions due to higher rates and because of a good cash position. The budget deficit only amounted to P25.55 billion as of September against a P283.7-billion year-end cap.

This time, however, Neri said payments due by beginning of 2016 may put pressure to sell more Treasury notes to pay existing debts despite higher rates that may come with the US Federal Reserve hike seen this month.

For his part, DBS Ltd. economist Gundy Cahyadi said as a proportion of gross domestic product (GDP), debt as of the third quarter accounts at a “modest” 45.3 percent. The target this year is to lower it to 44.7 percent.

The government borrows from foreign and local markets to finance its deficit and pay existing debts. However, analysts look more at the debt-to-GDP ratio than absolute amounts to measure its sustainability.

Neri said since the Aquino administration took over, there has been a “remarkable improvement” in the debt metrics. A ratio of 50 percent or lower is traditionally considered safe.

By absolute amounts, local debts as of October rose due to higher issuance of Treasury papers. The government sells Treasury bonds and bills twice a month to investors, who in turn lend it money for a particular period and interest.

Government security issuances rose 3.8 percent in October to P3.897 trillion, data showed. The small balance of P598 million in local debts came from direct loans.

On the other hand, foreign loans drove external debts higher. Figures showed direct loans increased 6.6 percent to P763.404 billion. Bulk of the amount — at P735.68 billion — was availed by state agencies.

Foreign debt papers issued, meanwhile, declined 4.4 percent to P1.296 trillion. 

“This was tempered by the impact of the stronger peso against the dollar and third currency-denominated debt that reduced the value of debt by P2.19 billion and P4.55 billion, respectively,” the Treasury said.