The national government registered a slightly higher outstanding debt as of the end of April, at P16.75 trillion, an increase of 0.41 percent from the previous month, primarily due to a stronger peso.

The Bureau of the Treasury (BTr) on Tuesday reported a 1.85 percent increase in domestic debt, amounting to P11.59 trillion.

BTr said domestic debt consisted of government bonds totaling P300 billion due to strong investor demand.

“With economic fundamentals remaining sound, the country continues to enjoy strong market access at reasonable rates,” the Treasury said.

In April, global credit analyst Fitch Ratings affirmed an investment-grade rating of “BBB” for Philippine securities and a stable economic outlook.

Meanwhile, external debt declined by 2.68 percent to P5.16 trillion in April as the local currency appreciated against the US dollar, resulting in government savings of P124.74 billion.

Domestic funding gets priority

The government continued to rely heavily on domestic funding sources, expanding its share to 69.2 percent of the total debt, while the portion of foreign loans shrank to 30.8 percent.

“This is in line with the national government’s thrust to reduce exposure to external vulnerabilities,” BTr said.

BTr said the bulk of government loans or 91.7 percent required fixed interest rates and had long-term maturities which “helps insulate public finances from abrupt changes in interest rates and the market environment.”

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said global interest rates might remain relatively elevated as investors worry about the global impact of Trump’s tariffs and tax plan.

“The benchmark 10-year US Treasury yield is still among three-month highs at 4.43 percent due to Trump’s tax plan that could lead to wider budget deficit and more debt,” he said.

“The US Treasury yield is the benchmark for borrowing costs for many governments and businesses globally so other global bonds could move higher with the US Treasury yields,” Ricafort added.

The economist said investors might demand higher rates in anticipation of higher global inflation due to US President Donald Trump’s threats to pursue a 145 percent tariff on Chinese goods.

Trump also recently announced higher tariffs on steel and aluminum exports to the US, increasing them to 50 percent from 25 percent.

Ricafort said these factors could prompt the US Federal Reserve to maintain a tight policy rate, which the Bangko Sentral ng Pilipinas and other central banks might follow to preserve healthy levels of foreign investment and exchange rates.

“Trump’s tariffs are now focused on the European Union after China, which could lead to higher US inflation and unemployment rate and result in a cautious stance by most Federal Reserve officials,” the economist said.