NG debt hits record PHP 16.63 trillion

The Nationbal Government’s (NG) outstanding debt rose to a fresh high of PHP 16.63 trillion as of end-February, the Bureau of the Treasury (BTr) reported.

Latest data from the BTr showed that the debt jumped by 1.96% from PHP 16.31 trillion at the end of January.

Year on year, outstanding debt went up by 9.57% from PHP 15.18 trillion as of end-February 2024.

“The rise was primarily driven by the net issuance of new domestic and external debt to support more public programs and projects,” the BTr said in a statement on Tuesday.

Despite hitting another record high, the Treasury said the outstanding debt “remains manageable.”

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bondholders and other investors.

“Nevertheless, the increase was partially offset by the strengthening of the peso against the US dollar, which appreciated from PHP 58.375 at the end of January to PHP 57.99 at the end of February, helping manage foreign debt obligations,” it added.

The bulk or 67.5% of the total debt was owed to domestic creditors, while the rest was owed to foreign creditors.

“This financing mix reflects a prudent approach to debt management to help mitigate exposure to external risks while taking advantage of the country’s liquid domestic market,” the BTr said.

Domestic debt, which was composed of government securities, increased by 1.26% to PHP 11.22 trillion as of end-February from P11.08 trillion as of end-January.

Year on year, it also rose by 6.12% from PHP 10.58 trillion in February 2024.

“This was mainly due to PHP 140.72 billion in net domestic financing, as the PHP 268.25-billion gross issuance of government securities exceeded redemptions of PHP 127.53 billion for the month,” the BTr said.

However, the rise in domestic debt was tempered by the peso appreciation against the US dollar, which reduced the overall valuation by PHP 1.1 billion.

Meanwhile, external debt rose by 3.44% to PHP 5.41 trillion from PHP 5.23 trillion in the previous month.

Year on year, foreign debt climbed by 17.52% from PHP 4.6 trillion.

“This was attributed to the net availment of foreign borrowing amounting to PHP 193.71 billion and the PHP 20.41-billion net appreciation effect on third currency-denominated debt,” the BTr said.

“However, these factors were partially offset by a PHP 34.48-billion reduction due to the peso appreciation against the US dollar,” it added.

External debt was composed mainly of PHP 2.53 trillion in loans, and PHP 2.88 trillion in government securities.

“For the month, the NG secured a total of PHP 197.3 billion in external financing, including PHP 190.82 billion through a triple-tranche global bond issuance comprised of 10- and 25-year USD bonds (USD 2.25 billion), and 25-year EUR bonds (1 billion euros) and PHP 6.48 billion in project loans,” the Treasury said.

The BTr said the project loans will fund rail projects through the Japan International Cooperation Agency (PHP 3.86 billion) as well as physical connectivity and health sector efforts with the Asian Development Bank (PHP 1.71 billion).

For February, NG-guaranteed obligations slipped by 1.49% to PHP 341.11 billion as of end-February from the end-January level of PHP 346.27 billion.

Year on year, it fell by 1.11% from PHP 344.93 billion.

“The decrease resulted from the net repayment of both domestic and external guarantees, amounting to PHP 5.83 billion and PHP 0.15 billion, respectively,” the BTr said.

However, this was partially offset by the PHP 1.43-billion net appreciation effect on third currency-denominated guarantees, it added.

Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said the increase in the debt level reflected new government borrowings.

“This trend may continue this year as the government plans to borrow again, mainly from domestic sources, to support their programs,” he said.

“Moreover, the forecasted peso depreciation against the US dollar may inflate the dollar value of foreign debt,” Mr. Erece added.

He also said the debt is still manageable “as long as the government continues to enhance its revenue generation, and (economic) growth exceeds the growth in expenditures.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher NG debt level is due to the need to finance the budget deficit.

“There is a need to bring down the share of debt servicing costs as a percentage of the total national budget as a test of the need for more tax reform and other fiscal reform measures to structurally narrow the budget deficit and curb the growth in overall debt in view of the large borrowings/debt since the COVID-19 pandemic,” he said.

Mr. Ricafort said there is a need to bring the NG debt-to-gross domestic product (GDP) ratio below the international threshold of 60%.

Outstanding debt as a share of GDP inched up to 60.7% as of end-2024 from 60.1% a year earlier.

The NG’s outstanding debt is projected to reach PHP 17.35 trillion by end-2025. – Aubrey Rose A. Inosante, Reporter