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NG debt only P60.2B higher in August

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The indebted state of the national government continued to push higher in August to P7.103 trillion as sustained operations supporting the Duterte administration’s Build, Build, Build program adds more than P60 billion to the debt pile.

According to the Bureau of the Treasury (BTr), the expansion in the liabilities of the national government was only 0.86 percent more than the previous July.

The bulk of those liabilities, or 64.37 percent, were debts obtained from local sources and the result of a conscious effort to keep most of the borrowings in local currency as a shield against economic reverses such as a sharply weakened peso, for instance.

Only 35.63 percent of the national government’s liabilities were borrowed from overseas creditors, a strategy that has obvious positive outcomes given external sector volatilities that has kept the peso weak against the US dollar.

A weak currency translates to more expensive foreign debt as the government has to come up with more pesos to pay for a given amount in US dollar debt.

But in this case, the national government deliberately incurred far more peso debt than dollar debt consistent with the broad borrowing plan preferring local sources of financing over foreign.

According to the BTr, domestic debt totaled P4.572 trillion at end-August this year representing an expansion by 0.6 percent versus the previous July.

The national government debt increased by P27.61 billion in that one-month period in absolute terms, the BTr said.

As for national government debt from external sources of funding, these grew to P2.530 trillion or 3.6 percent more than in July.

Such debt grew P87.88 billion more in over just a month, the BTr said.

“For the month, the lower domestic debt was due to the net redemption of government securities amounting to P27.77 billion, slightly offset by the depreciation of the peso that increased the value of onshore dollar bonds by P0.16 billion. To date, domestic debt has increased by P131.67 billionor 2.96 percent since the beginning of the year,” the BTr reported.

“NG external liabilities amounted to P2.530 trillion, P87.88 billion or 3.6 percent higher compared to the end-July 2018 level. The growth in external debt was due to net availment of foreign loans amounting to P72.30 billion, including the successful issuance of samurai bonds. Currency fluctuations on both US dollar and third currency denominated debt added P14.48 billion and P1.1 billion, respectively. From end-December 2017 level, NG external debt has increased by P319.76 billion or 14.5 percent.

“Total NG guaranteed obligations increased by nP1.07 billion or 0.2 percent month-on-month tro P484.97 billion in August. The increase was due to currency fluctuations on both the US dollar and third-currency denominated guarantees amounting to P1.75 billion and P0.89 billion, respectively. These were tempered by net redemption on domestic and external guarantee amounting to P1.27 billion and P0.30 billion, respectively. From end-December 2017 level, NG guarantees have increased by P6.86 billion or 1.4 percent,” the BTr said.

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