The government’s debt in April rose to P12.76 trillion, up from end March’s P12.68 trillion due to the net issuance of government (debt instruments) securities to both local and external lenders and the depreciation of the peso against the US dollar. By end 2022, this would rise to P13.42 trillion.
The National Government’s debt as of end April rose to P12.76 trillion, up from end March’s P12.68 trillion due to the net issuance of government (debt instruments) securities to both local and external lenders and the depreciation of the peso against the US dollar.
Faced with limited resources for next year, the next administration of the Department of Budget and Management (DBM) to be headed by incoming Secretary Amenah Pangandaman must implement austerity measures to maintain its smooth operation.
DBM Officer-in-Charge Tina L. Canda, in a television interview, refused to give a recommendation to her successor. “I can only speak about my department, the DBM and the problems we are facing mainly because of tight resources for 2023.”
“So, if you have tight resources, then you will have to make adjustments,” she added.
She said among her recommended cost-cutting measures would be the suspension of the construction of new buildings, procurement of new vehicles, and the conduct of training.
DBM issued the statement after confirming that the country’s debt has now ballooned to P12.7 trillion.
It said most of the amount was spent to address the impact of the novel coronavirus disease (Covid-19).
The Department of Finance (DOF) earlier said the next administration must generate P249 billion additional revenues so it could pay existing government debts without securing more loans.
Despite this challenge, Canda is confident the next administration can settle the existing debt by imposing new taxes or further “reopening” the economy to allow more businesses to operate and more people to return to work.
“So, we should not be afraid [of our debt]. Our economic managers assure [us] the loans they took were reasonable, which we can manage in the future,” Canda said.
Latest debt report from the Bureau of the Treasury on Thursday showed the country’s debt stock rose by 0.7 percent or P83.4 billion from P12.68 trillion as of end-March this year due to the net issuance of government securities to both local and external lenders and the depreciation of the peso against the US Dollar.
The latest debt level also jumped by 16.1 percent or P1.77 trillion from P10.99 trillion as of end-April last year.
Domestic debt, which comprised 70 percent of the total, grew by 0.8 percent month-on-month to P8.94 trillion as of end-April from P8.87 trillion. It also surged by 14.4 percent from P7.8 trillion a year ago.
Foreign debt as of end-April reached P3.83 trillion, growing by 0.4 percent or P16.2 billion from P3.81 trillion as of end-March.
“For the period, the increment to external debt was due to the net availment of external loans amounting to P28.56 billion and the effect of Peso depreciation against the USD amounting to P31.50 billion. This was tempered by adjustments in third currencies amounting to P43.86 billion,” the Treasury explained.
Year-on-year, foreign debt as of end-April climbed by 20.4 percent from P3.18 trillion.
The total guaranteed outstanding debt also rose by 0.6 percent month-on-month to P413.43 billion as of end-April on the back of the net availment of both domestic and external guarantees. However, this was a 4.9-percent drop from P434.74 billion a year ago.
Tax reform
Rizal Commercial Banking Corporation Chief Economist Michael Ricafort said the incoming Marcos administration would have to implement tax reform measures as well as exercise fiscal discipline to address the rise in debt stock, Business Mirror reported.
“In view of the streak of record highs in the government’s outstanding debt in recent months, the intensified tax collections from existing tax laws may not be enough and would inevitably require new tax/fiscal reform measures to curb additional borrowings/debt by the government, especially for the incoming administration,” Ricafort said.
While the further reopening of the economy may help the government raise revenues and reduce its debt, he warned that this may be offset by the continued increase in infrastructure spending that would lead to additional borrowings.
End-2022 outlook
By the end of this year, the government expects the country’s outstanding debt to soar to P13.42 trillion.
The national government’s debt-to-GDP ratio as of the first quarter of the year has also risen to a 17-year-high at 63.5 percent, above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. It is also the highest since the country’s debt-to-GDP ratio hit 65.7 percent in 2005 under the Arroyo administration.
Finance Secretary Carlos Dominguez III had said that the current debt level remains “sustainable” as the country needed to ramp up its borrowings for Covid-19-related expenditures amid weaker revenue collections during the pandemic.
Last week, DOF proposed that the next administration implement a set of fiscal measures seen to generate a total average of nearly P350 billion per year from 2023 to 2027 to help the country outgrow its debt at a faster rate.
The three-package proposed fiscal consolidation and resource mobilization plan unveiled last week includes the imposition of several taxes, 3-year deferment of the second tranche of reduction in personal income tax rates, and the expansion of value-added tax (VAT) base and removal of VAT exemptions—except for education, agricultural products, health, financial sector, and raw food, among others.
Institute for Leadership, Empowerment and Democracy (iLEAD) Executive Director Zy-za Nadine Suzara said the higher debt might be due to the outgoing administration’s infrastructure push.
“It’s hard to say if the ongoing external issues affected the country’s debt, especially since most of the new debt acquired from March to April 2022 were domestic,” she said in a Viber message. “At most, the increased oil prices and overall uncertainty played a role in driving up the need for cash… It’s more plausible that the government is really just cash-strapped to fund the rest of the year’s programs.”
Suzara told Business World the debt is expected to further increase since the government can’t generate enough revenues.
“To plug the budget deficit, the total financing requirement from both domestic and external sources is projected to reach P2.2 trillion. So far, the Treasury’s cash operations report shows that as of end April 2022, it already amounts to around P1.2 trillion,” she said. “If the next administration will not tweak the current fiscal program, then we can expect around P1 trillion more in addition to the current outstanding debt until the end of the fiscal year.”
Tags: #NGdebts, #austeritymeasures, #DBM