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An analyst predicted that the issue of bonds denominated in dollars or euros and the government’s effort to maintain the growth of its infrastructure investments to support the economy’s expansion will lead to an increase in government liabilities.

The chief economist of Rizal Commercial Banking Corporation (RCBC), Michael Ricafort, stated in a remark on Thursday that extra foreign currency-denominated debt papers are being issued in addition to the locally planned borrowings to help finance the government’s spending.

Infrastructure spending as a percentage of GDP (gross domestic product) increased to more than 5% in recent years and is likely to be sustained as a policy priority, he said. “New official development assistance (ODA) and other multilateral funding, especially for the country’s various infrastructure projects, would also add to the country’s outstanding national government debt in the coming months,” he said.
During the Duterte administration, government investment in infrastructure increased from a previous 3 percent of GDP to approximately 5%.

In order to guarantee the domestic economy’s recovery and sustain its long-term growth, the current administration seeks to maintain this objective.

“In the future, faster economic growth would help further reduce/improve the debt-to-GDP ratio to below the 60 percent international threshold to help sustain the country’s favorable credit ratings at 1-3 notches above the minimum investment grade, together with tax and other fiscal reform measures to help further increase structurally tax revenue and other revenue collections of the government,” Ricafort continues.
The ratio of the nation’s liabilities to domestic output was 60.9 percent as of the end of 2022, down from the 17-year high of 63.7 percent as of the end of September 2022.

As the government used available funds to assist finance pandemic-related expenses, the nation’s debt-to-GDP ratio increased.

Officials attribute the nation’s declining debt-to-GDP ratio to the economy’s ongoing reopening, which has improved economic activity and increased tax revenue for the government.

The National Government’s (NG) liabilities increased to PHP13.75 trillion as of the end of February this year, according to a report released on Thursday by the Bureau of the Treasury (BTr). This was due to the issuing of government securities (GS) as well as the effects of a lower peso.

According to BTr data, the NG’s most recent debt level increased by about PHP54.26 billion as compared to the level from the previous month “due to the net issuance of domestic securities.”

The majority of the debt, or around 68.7 percent, is made up of domestic liabilities, totaling PHP9.44 trillion, while the remaining PHP4.31 trillion, or 31.3 percent, is made up of debt denominated in foreign currencies.
According to the BTr, domestic debt increased by roughly 0.6 percent, or PHP57.22 billion, month over month as a result of net borrowing of PHP55.88 billion and the “PHP1.34 billion effect of local currency depreciation versus the US dollar on onshore foreign denominated assets.”

In the meantime, compared to the level at the end of January, liabilities denominated in foreign currencies decreased by 0.1 percent, or roughly PHP2.96 billion, “due to the PHP21.15 billion net repayment of foreign loans and PHP32.32 billion impact of third-currency adjustments against the US dollar.”

The impact of local currency devaluation versus the US dollar, which amounted to PHP50.51 billion, was outweighed by these, according to BTr.
From the end of January level to PHP387.19 billion, the total guaranteed commitments of the NG decreased by 1.7 percent, or PHP6.64 billion, “owing to the net repayment of both domestic and external guarantees equal to PHP2.56 billion.”

According to BTr, the net depreciation of foreign currencies relative to the dollar further reduced the national debt by PHP3.09 billion, “more than compensating the net depreciation effect of the local currency amounted to PHP2.22 billion.”

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