Govt. debt slips to ₱9.79 trillion in end-2020, now 54.5% of GDP

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Metro Manila (CNN Philippines, January 2) — The country’s outstanding debt slightly fell at the end of 2020 after the government settled more of its domestic loans.

The Treasury Bureau reported on Tuesday total government loans stood at ₱9.795 trillion, 3.3% less than the ₱10.13 trillion logged in November. However, it was 26.7% higher than the debt stock at end-2019, with the increase driven by the funding demands of the COVID-19 pandemic. 

The end-December’s figure was close to the expected ₱10.16 trillion total outstanding debt by the end of 2020 posted earlier by the Budget Department’s data.

Debts to local sources amounted to ₱6.694 trillion at end-2020, 6.9% lower than the level in November “primarily due to the repayment of the ₱540 billion provisional advances from BSP,” the bureau said.

The central bank earlier approved the national government’s request for a short-term ₱540 billion loan to support its funding needs as the country’s budget deficit continued to balloon due to spendings incurred to cope with the COVID-19 pandemic.

Meanwhile, external loans reached ₱3.1 billion as of end-December, 5.4% higher from the month prior. Net availment of foreign debts reached ₱151.43 billion, which included the newly issued Republic of the Philippines bonds worth ₱132.06 billion.

“[T]he appreciation in third-currency denominated loans added ₱10.67 billion to the peso value of external obligations,” said the bureau, while appreciation of the peso trimmed ₱3.91 billion.

The government has resorted to foreign and local sources to secure funds for its measures to confront the health crisis. With this, the country’s outstanding loans are now equivalent to 54.5% of the local economy, a far cry from the 39.6% debt-to-GDP ratio recorded at end-2019.

“This resulted from the higher financing requirement to address the pandemic alongside a 9.5% contraction in the economy for the year,” the bureau explained. 

In mid-2020, the Finance Department said the government would keep national borrowings at half the size of the economy to allay worries the Philippines will drown in debt. Meanwhile, Bangko Sentral ng Pilipinas Governor Benjamin Diokno earlier said it’s still manageable to keep the debt-to-GDP ratio at 60 percent or lower. 

In a market report, RCBC chief economist Michael Ricafort said national debt could still go up in the coming months. This is “in view of the recent borrowings by the government, both commercial and multilateral/official development assistance (ODA); partly to finance various COVID-19 programs,” he said, also including additional loans to fund the purchases of vaccine doses.

The government’s payment guarantees also went up as of end-2020 by ₱15.52 billion, 3.5% higher than end-November’s figures. The bureau attributed this to the net availment of domestic guarantees amounting to ₱27.52 billion, with third currency adjustment adding ₱1.47 billion to external guarantees’ peso value.

“These more than offset the ₱0.29 billion effect of local currency appreciation and ₱13.18 billion net repayment of external guarantees,” the Treasury Bureau added.