DEBT. The issuance of more government securities and tapping of loans to finance infrastructure spending are expected to increase the government's debt. However, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said Thursday (March 30, 2023) that since the economy has been reopened, the government’s revenue collections have improved and will even get a boost from the various fiscal reform measures. (PNA file photo)

MANILA – The issuance of United States dollar or euro-denominated bonds and the government’s bid to sustain the rise of its infrastructure investments to boost the economy’s expansion are expected to further increase government liabilities, an economist said.
In a commentary on Thursday,  Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the issuance of additional foreign currency-denominated debt papers is on top of the programmed borrowings locally, which is being done to help finance the government’s spending.
“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, as infrastructure spending as a percentage of GDP (gross domestic product) increased to more than 5 percent in recent years and likely to be sustained as a policy priority,” he said.
Government spending on infrastructure rose to around 5 percent of GDP during the Duterte administration from around 3 percent in the past.
The current government bids to continue this goal to ensure the recovery of the domestic economy and sustain its long-term growth.
“Going forward, faster growth in the economy, together with tax and other fiscal reform measures to help further increase structurally tax revenue and other revenue collections of the government; combined with more disciplined  government spending, would help further reduce/improve the debt-to-GDP ratio to below the 60 percent international threshold to help sustained the country’s favorable credit ratings at 1-3 notches above the minimum investment grade,” Ricafort added.
As of end-2022, the share of the country’s liabilities to domestic output stood at 60.9 percent, down from the 17-year high of 63.7 percent as of end-September 2022.
The country’s debt-to-GDP ratio rose during the pandemic as the government tapped available funds to help finance pandemic-related expenses.
Authorities traced the decline in the debt-to-GDP level of the country to continued reopening of the economy, which boosted economic activities and helped increase tax collection for the government.
Meanwhile, the Bureau of the Treasury (BTr) reported on Thursday that the issuance of government securities (GS) and the impact of a weaker peso resulted in the rise of the national government’s (NG) liabilities to PHP13.75 trillion as of end-February this year.
BTr data showed that the latest debt level of the NG rose by around PHP54.26 billion compared to the previous month’s level “due to the net issuance of domestic securities.”
Bulk or about 68.7 percent of the debt is accounted for by domestic liabilities at PHP9.44 trillion while the balance of 31.3 percent or PHP4.31 trillion is composed of foreign currency-denominated debt.
The BTr said domestic debt rose by around 0.6 percent or PHP57.22 billion month-on-month due to net availment of around PHP55.88 billion financing and the “PHP1.34 billion effect of local currency depreciation against the US dollar on onshore foreign denominated securities.”
Meanwhile, foreign currency-denominated liabilities declined by 0.1 percent or around PHP2.96 billion compared to the end-January level “due to the PHP21.15 billion net repayment of foreign loans and PHP32.32  billion impact of third-currency adjustments against the US dollar.”
“These outweighed the effect of local currency depreciation against the US dollar, which amounted to PHP50.51 billion,” the BTr said.
Total guaranteed obligations of the NG slipped by 1.7 percent, amounting to PHP6.64 billion, from the end-January level  to PHP387.19 billion “due to the net repayment of both domestic and external guarantees amounting to PHP2.56 billion.”
The BTr said the impact of the net depreciation of third currencies against the greenback further lessened the NG debt by around PHP3.09 billion “more than offsetting the net depreciation effect of the local currency amounting to PHP2.22 billion.” (PNA)