Infra, social spending push debts higher
The government raised P10 billion in Treasury bills and P121.721 billion for the fixed rate treasury bonds
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The government raised P10 billion in Treasury bills and P121.721 billion for the fixed rate treasury bonds
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The unrelenting infrastructure push and continuous social assistance resulted in the national government’s gross borrowings rising 77.48 percent in May to reach P251.451 billion, up from P141.671 billion a year ago.
Despite the rise in the periodic debt figure, data showed an easing trend in foreign loans, according to an economist.
“Heavy foreign borrowing can also affect the peso’s value, leading to higher prices for imported goods and contributing to inflation,” an economist said.
Foreign debts peaked at $128.7 billion by the end of March, marking a $3.3 billion increase from the $125.4 billion as of end-December 2023
Faster economic growth, however, made the debt level remain manageable.
One of the key indicators used to gauge debt sustainability is the debt-to-gross domestic product ratio, which currently stands at 29 percent for the Philippines.
This ratio is considered better than the global average as some nations have a level of more than 50 percent.
Financing hits P127B
Gross foreign financing as of May this year amounted to P127.613 billion, higher than the P14.991 billion last year.
For the month cited, gross external borrowings were composed of new project loans worth P12.366 billion and P115.247 billion in global bonds.
Meanwhile, gross domestic borrowings slightly plummeted by 0.053 percent to P713.13 billion as of end-May from the P652.99 billion recorded a year ago.
The government raised P10 billion in Treasury bills and P121.721 billion for the fixed rate treasury bonds.
The government’s gross financing in the first five months of the year amounted to P1.038 trillion, lower than the P1.167 trillion recorded in the same period last year.
Foreign financing amounted to P251.712 billion, 26.80 percent lower than its year-ago level of P343.874 billion.
The government was able to borrow from foreign sources from January to March through project and program loans, and global bonds worth P41.030 billion, P95.435 billion, and P115.247 billion respectively.
Domestic borrowings during the first five months of the year reached P1,170 trillion, higher than the P880.905 billion recorded a year ago.
The government, during the January to May period, raised P86,822 billion in Treasury bills, P584,861 billion in retail Treasury bonds, and P498,979 billion in fixed-rate Treasury bonds.
Economic analysts interviewed by DAILY TRIBUNE raised the following possible effects of higher government borrowings, particularly from foreign sources, for ordinary Filipinos, with most saying it could lead to inflation if not managed properly.
“This could increase the cost of living, particularly for essential goods and services, making daily expenses more burdensome for ordinary Filipinos,” an economics professor who requested anonymity told DAILY TRIBUNE.
“Increased borrowing often translates to higher future debt repayments, which might constrain the government’s ability to invest in social services, infrastructure, and other public goods.”
On the other hand, the government might also be constrained to raise taxes or cut spending in other areas to sustain repayments.
Still, managed properly, borrowings can stimulate economic growth through infrastructure projects and social programs, he explained.
As for the private sector, he said higher domestic borrowing could lead to increased interest rates, affecting loans and mortgages for consumers and businesses.
“The Philippine government’s borrowing trends indicate a significant reliance on both domestic and foreign financing. While borrowing can be beneficial for economic growth and development, it carries risks, particularly concerning inflation and economic stability,” he pointed out.
“For ordinary Filipinos, these trends could translate to higher living costs, potential tax increases, and variability in public service delivery. Effective management and strategic use of borrowed funds are, thus, crucial to mitigating negative impacts and promoting sustainable economic growth,” he averred.
$1.25-B loan for schools, infra
Proof that the government is investing heavily in social services is the World Bank approved a total of $1.25 billion fund for the Philippines for two projects on disaster resilience of schools and better policies on green infrastructure.
The multinational lender said the loans for both projects were approved by the World Bank’s Board of Executive Directors on Friday.
First, the bank allotted $500 million for the Infrastructure for Safer and Resilient Schools Project.
The amount will be used for repair, rehabilitation, retrofitting, reconstruction, and site improvements of schools that have been severely affected by earthquakes and tropical cyclones in recent years.
The World Bank said 700,000 students will benefit from this project, providing them with a comfortable learning environment.
“Education is a key component of human capital. By improving the learning environment and making schools safer, children are more likely to attend classes, perform better academically, and complete their education,” World Bank Country Director for the Philippines Ndiamé Diop.
