Government debt slightly declines to P6.83t

The government’s outstanding debt slightly declined 0.6 percent or P42.14 billion to P6.83 trillion in May from the previous month, the Bureau of the Treasury said Friday.

Data showed that of the total debt stock, 35.25 percent or P2.4 trillion were secured externally while 64.75 percent or P4.42 trillion were borrowed domestically. 

The domestic debt of P4.42 trillion dropped P74.52 billion or 1.7 percent in May from the previous month.

“There was a P74.93-billion net redemption of government securities in May slightly tempered by the P0.41 billion effect of the weaker peso for the month. To date, domestic debt has managed to decrease by P16.92 billion or 0.4 percent since the beginning of the year,” the Treasury said.
External debt increased P32.38 billion or 1.4 percent to P2.4 trillion was P32.38 billion from the end-April 2018 level.

“The increment was due to the weaker peso that increased the peso value of FX debt by P37.66 billion. This was slightly trimmed by net repayments on external loans amounting to P4.89 billion and the impact of net depreciation on third currency-denominated debt amounting to P0.39 billion,” the Treasury said.

source:  Manila Standard

Debt service payments rise over 207% in May

PAYMENTS to service government debt rose 207.51% year on year in May, driven by an increase in principal settlements on domestic obligations, the Treasury bureau said.

The national government in May made payments of P78.38 billion, against P25.49 billion a year earlier.

Month on month, the debt service bill rose against the P26.29 billion worth of payments made in April.

The surge was driven by principal payments worth P57.42 billion, well over the P6.83 billion recorded in the same month in 2016.

Principal repaid to domestic lenders grew to P50.9 billion, compared to P190 million a year earlier.

Principal repaid to external creditors meanwhile totaled P6.52 billion, little changed from the P6.64 billion in the same period of 2016.

Interest payments totaled P20.96 billion in May, up 12.33% from a year earlier.

Of the total, P18.75 billion went to domestic lenders -- of which P16.46 billion went to interest payments on fixed-rate Treasury bonds, P1.88 billion for retail Treasury bonds, and P378 million for Treasury bills.

Foreign interest payments meanwhile totaled P2.22 billion.

Domestic payments for both principal and interest took up 88.85%, or P69.65 billion, of the debt service bill that month while foreign lenders were paid P8.74 billion.

The total debt service bill for the five months to May was P353.32 billion, down 27.09% from a year earlier.

The government borrows from both local and external sources to finance its intended budget deficit of 3% of gross domestic product, or about P482.1 billion. -- E.J.C. Tubayan

source:  Businessworld

Gov’t debt may top P7 trillion in 2018 amid infra push

THE GOVERNMENT’S outstanding debt may breach the P7 trillion mark next year, according to the Treasury bureau.

Amid preparations for the Budget Expenditures and Sources of Financing report for next year, National Treasurer Rosalia V. De Leon said that they have given the Budget department a P7.05 trillion debt forecast to be programmed in the general appropriations act.

“For 2018, its P7.05 trillion,” she told reporters late last week when asked for its debt program next year.

The projected rate of increase for the 2018 debt is 8.96% against the downward-adjusted P6.47 trillion outstanding debt in 2017. The growth rate compares to 6.24% between 2016 and 2017.

However in terms of the share of the country’s economy, the projected total is 39.7% of gross domestic product (GDP) from the 40.76% ratio for this year and 42.18% in 2016.

Asked for the economic implications of higher debt, Finance undersecretary Gil S. Beltran said that the growing economy will outpace the rise in debt.

“It’s just a number. Actually it’s nominal so even if the number increases the value of that debt decreases, because over time it’s subject to inflation. So the best measure is actually percentage of GDP because that is the level of resources that a country generates,” he said.

“Payments come out from production -- the goods and services that are produced. It is always measured in terms of percent of GDP. And (the share) is going down,” said Mr. Beltran, who is also the Finance department’s chief economist.

He said that the globally accepted standard of a safe debt ratio is 50%.

Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion said his asessment of the debt will depend on the success of tax reform.

“It is fiscally sound, as long as the government sticks to its targets, particularly that of the needed reforms in taxes and improvements in the general collection of taxes. In all fairness, government has been collecting more and is expected to collect more when the new taxes are in place,” he said.

“Fiscal discipline is important moving forward. If the fiscal reforms are not instituted as expected and planned, there might be difficulty meeting the targets and the overall plan of making lives better for all will be undermined.”

The tax reform program aims to raise government revenue by making the tax system more efficient, by removing some tax exemptions, harmonizing estate and donor taxes, increasing petroleum and automobile excise tax rates while reducing personal income tax rates.

The government had a P6.345 trillion debt as of end-May, growing 7.8% from a year earlier. The outstanding debt was at 98.07% of the P6.47 trillion programmed for this year.

Over 65% or P4.14 trillion of this amount is owed to domestic lenders, while the P2.21 trillion remaining obligation was borrowed from external sources.

The government borrows to plug its fiscal deficit, and to likewise pay down maturing debt. It aims to maintain an 80-20 borrowing mix, in favor of domestic sources.

The government has secured official development assistance (ODA) packages and concessional loans from regional partners such as China, Japan and South Korea, noting their willingness to participate in building up the country’s infrastructure.

“[The debt] has to increase because we are building infra,” said Mr. Beltran. -- Elijah Joseph C. Tubayan

Gov’t debt increases 6.57% to P5.63T in Q1

The outstanding debt of the government rose 6.57 percent in March as it continued to rely on borrowings to partly fund its expenditure requirements.

The Bureau of Treasury, a unit of the Department of Finance, reported that the country’s debt stock reached P5.63 trillion as of end-March.

The amount was also P37 billion higher from the P5.59 trillion recorded the previous month.
Of the outstanding liabilities, a bigger portion or P3.66 trillion was accounted for by peso-denominated liabilities. This represented an increase of 7.36 percent year-on-year.
Domestic borrowings are done mainly through the sale of Treasury bills and bonds.

The Aquino administraton has maintained a policy of borrowing more from the domestic market rather than from foreign sources to avoid incurring too much foreign exchange risks.

The balance of P1.97 trillion was accounted for by debt denominated in foreign currencies. This was 1.02 percent higher.

Foreign borrowings comprise loans secured from development lenders such as the World Bank, Asian Development Bank and the Japan International Cooperation Agency.

Borrowings by the government are aimed at plugging the country’s budget deficit.
Total guaranteed debt stood at P471 billion, down 1.88 percent year-on-year.  This is largely due to the reduction in external guaranteed obligations – a product of net repayments and currency adjustments.

Despite the continued increase in government’s outstanding debt, the country’s liabilities remain manageable as it has been able to keep its budget to two percent of gross domestic product (GDP).

The government’s debt stock as of the end of 2013 went up by only 4.5 percent to P5.68 trillion.
Given this, the ratio of debt to GDP stood at P4.53 trillion or 39.2 percent, lower than the P40.6 percent (P4.28 trillion) recorded in 2012 as a result of the ongoing fiscal consolidation.

The country’s deficit also accounted for 1.3 percent of GDP last year.

source:  Philippine Star