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TUESDAY, November 29, 2022
Philippine debt hits record $133 bn

Philippine debt hits record $133 bn

TUESDAY, May 01, 2018

THE Philippines’ outstanding debt increased to a record high above US$133 billion at the end of the first quarter, due to a weaker peso and the government’s issuance of debt paper in China in March.

With the record mark of 6.879 trillion pesos, the the government’s outstanding obligations as of end-March inched up 0.9 per cent from 6.82 trillion pesos in February as well as jumped 11.1 per cent from 6.189 trillion pesos in March last year, the latest Bureau of the Treasury data released on Monday night showed.
Domestic debt, which accounted for 65 per cent of the total, rose 0.8 per cent month-on-month and 12.6 per cent year-on-year to 4.46 trillion pesos.
In a statement, the Treasury attributed the month-on-month increase to “net issuance of government securities amounting to 35.82 billion pesos and peso depreciation,” noting that the domestic currency weakened to 52.25:$1 at end-March from 52.07:$1 in February.
External debt, meanwhile, climbed 0.9 per cent month-on-month and 8.6 per cent year-on-year to 2.413 trillion pesos.
The higher foreign debt from February levels was “due to the combined effect of peso depreciation and the upward adjustment in third currency-denominated debt amounting to 8.26 billion pesos and 1.72 billion pesos, respectively,” the Treasury said.
“Additionally, net issuance for the month amounted to 12.34 billion pesos, including the successful inaugural issuance of Panda bonds ($233 million),” the Treasury added.
To recall, the government sold 1.46 billion yuan or nearly 12.2 billion pesos in three-year panda bonds in China at a tight yield of 5 per cent.
Last week, economic managers increased the share of foreign borrowings to the total financing program in the next five years, citing “good” rates being offered by China, Japan and South Korea to finance priority projects and programmes.
The Cabinet-level Development Budget Coordination Committee (DBCC) had adjusted the financing program to 65 per cent domestic, 35-percent external for this year from the 74:26 mix approved during its meeting last December.
“With the pre-funding exercise in the sale of treasury bonds in fiscal year 2017, there is a lower requirement for local financing in 2018,” the DBCC had explained.
In January, the Philippines sold a total of $2 billion in 10-year dollar-denominated global bonds at a coupon rate of 3 per cent.
The government also plans to issue yen-denominated samurai bonds in Japan before yearend.
For 2019 to 2022, the borrowing mix will be 75:25 in favour of domestic sources, even as there was an increase in the share of foreign borrowings from 20 percent previously.
As for the adjusted financing mix for the next four years, the DBCC had explained that the government was “diversifying its investor base and tapping new markets to meet its financing requirements at the most cost-efficient manner.”
Despite a programmed increase in foreign borrowings, “the debt-to-GDP [gross domestic product] ratio is also projected to continue its decline from 42.1 percent in end-2017 to as low as 38.9 percent in 2022,” the DBCC had said. Budget Secretary Benjamin Diokno had said that the new borrowing programme would “allow the Philippine government to take advantage of foreign loans.”
“We are getting offers from both China and Japan—good rates, for example, for the Metro Manila Subway [project]. We’re going to get the best terms possible… South Korea is also offering. Because of these possibilities, we have raised the amount of money [to be borrowed] from foreign sources,” Diokno had said.
Interest rates for soft Chinese loans are at about 2 per cent, Diokno had noted. The recently approved official development assistance from Japan for the subway, meanwhile, will be slapped interest of only 0.1 percent, with a repayment period totalling 40 years, including a 12-year grace period.