Public debt rises in April after a weak peso

By means of Luisa Maria Jacinta C. Jocson, News reporter

The National Government’s (NG) outstanding debt returned to the $15 trillion level at the end of April due to the weaker peso, the Bureau of the Treasury (BTr) said.

Data from the BTR on Thursday showed outstanding debt rose 0.61% to P15.02 trillion at the end of April from P14.93 trillion at the end of March.

“Total debt increased by P91.5 billion or 0.61% from the end-March 2024 level due to net government debt. Ffinancing and the impact of the depreciation of the local currency on the valuation of foreign currency-denominated debt,” the BTr said.

Year on year, outstanding debt increased by 7.95%, compared to P13.91 trillion in the same period a year ago.

Of the total debt, more than two-thirds, or 68.64%, came from domestic sources.

At the end of April, outstanding domestic debt rose 0.3% to P10.31 trillion from P10.28 trillion at the end of March. It also rose 8.99% from P9.46 trillion in the same period a year earlier.

Government bonds made up almost all of the domestic debt at the end of April.

“This month, the increase was due to the net issuance of government bonds of P27.23 billion and the net issuance of government bonds of P3.78 billion.Feffect of the depreciation of the peso on domestic debt denominated in foreign currency,” the report said.

BTr data shows that the peso closed at P57.583 against the dollar at the end of April, weakening by P1.323 from its P56.26. Ffinished a month ago.

Meanwhile, external debt rose 1.3% to P4.71 trillion at the end of April from P4.65 trillion at the end of March. Year-on-year, external debt rose 5.74% from P4.45 trillion.

“While there was a net repayment of P32.91 billion in foreign loans within the month, the significant depreciation of the peso caused an upward adjustment of P109.31 billion in the local valuation of US dollar-denominated debt, partially offset by the P15 A downward adjustment of $0.91 billion caused by the opposite movement of third currency debt,” the BTr added.

External debt consisted of P2.25 trillion in loans and P2.46 trillion in global bonds.

Broken down, global bonds consisted of P2.07 trillion in US dollar bonds, P212.85 billion in Euro bonds, P64.03 billion in Japanese yen bonds, P57.58 billion in Islamic certificates and P54.77 billion in global peso bonds .

Meanwhile, NG’s guaranteed liabilities in April amounted to 356.06 billion euros, up 2.89% from 346.04 billion euros in March. However, it declined by 6.47% from P380.69 billion in the same period in 2023.

“The increase was due to the net utilization of domestic guarantees amounting to P7.54 billion and the impact of the depreciation of the peso on foreign currency-denominated guarantees amounting to P3.8 billion,” the BTr said.

“On the other hand, adjustments of the third currency against the US dollar declined to P1.32 billion,” it added.

Analysts noted that the depreciation of the peso contributed to the increase in debt from the end of April.

“This increase of 0.61% compared to March is due to a combination of government loans and a weaker peso. Domestic debt grew slightly, driven by new government bond issuance and the depreciation of the peso,” Security Bank Corp. said. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Roces said the higher foreign debt was “mainly due to the depreciation of the peso, which inflates the value of dollar-denominated debt, outweighing a small decline against other currencies.”

In mid-April, the peso fell to the level of P57 per dollar for the FThe first time since November 2022, which at the time was also the worst closing in 17 months.

“The weaker peso exchange rate in the past two years could also have increased the peso equivalent of foreign debt,” said Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp. in a Viber message.

Mr Ricafort said outstanding debt could rise further after the government’s issuance of dollar bonds in May and other borrowing planned for the rest of the year.

The Philippine government raised $2 billion in May from issuing dollar bonds in two tranches Ffirst global bond sale of the year.

The government’s borrowing program this year is set at €2.57 trillion, of which 75% will come from domestic sources and the rest from foreign sources.

As of the first quarter, NG’s debt as a percentage of gross domestic product (GDP) stood at 60.2%. This was less than 61.1% a year ago, but higher than 60.1% at the end of 2023.

The government’s debt-to-GDP target for this year has been set at 60.3%. It aims to reduce this further to 55.9% by 2028.