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According to reports on the Philippines government made available by the media, the immediate debt profile of the government has risen to ₱ 7.16 trillion in the last quarter of the year 2018. The recent debt growth is a sharp increase of ₱56 billion from August 2018. The debt profile has increased by more than half a trillion Pesos since the present government of Duterte got into power in 2016.
According to reports released by the Bureau of Treasury of the Philippines, the national debt, as at September 2018 remains ₱7.159 trillion, and out of this, the domestic debt stands at ₱ 4.587 trillion, while foreign debt stands at ₱2.572 trillion. Aside from constant borrowing by the government of the Philippines, it is believed that the volatile exchange rate between the US dollar and the Peso, has contributed tremendously to the growing debt profile of the government. The recent domestic debt has been increased by over ₱14.8 billion recently due to the fluctuating exchange rates alone.
Financial experts believe that for the month of September, the domestic debt was also due to the net issuance of securities by the government, and that amounts to ₱14.54 billion. The depreciation in the value of the Peso, which leads to the increase in offshore dollar bonds by ₱0.31 Peso, also contributed to the debt profile. At the end of September, the Peso had depreciated to ₱54.10 against the US dollar.
When it comes to the external debt profile, the government of Duterte had borrowed an additional ₱22.52 billion and with the depreciation of the Peso, the total money borrowed had reached ₱29.68 billion, not adding the interest rates on the loan. There was a slight reprieved brought about by the net depreciation of the third-currency denominated debt, to a total value of ₱ 11.13 billion, according to the Bureau of Treasury.
The debt profile of the Philippines by the end of 2016 was ₱6.603 trillion, shortly before the current government took over. The National debt had actually reduced to ₱5.267 by 2010 when the former president- Benigno Aquino III was elected, and at the end of 2004, the debt profile stood at ₱4.645 trillion, when the former president- Arroyo was sworn in for a second term in office.
Many financial experts believed that the lower debt incurred by successive governments, before the current Duterte era, might have been as a result of a stronger Peso currency. Though, president Duterte is making frantic efforts to expand the economy, increase exports and ensure that the middle class is strengthened to ensure that poverty levels reduce drastically. Many experts still believe the current debt profile of the nation is unjustifiable.
There is no clear indication whether some national assets of the Philippines are tied to any of these debts. If this is the case, then we may witness the takeover of some of these national assets, just in case the Philippines default in the repayment of the loans.
According to the Bureau of Treasury, the national government plans to increase its borrowing by roughly ₱1.1 trillion in 2019 and that will be 20% higher than this year borrowing of ₱986 billion. Rosalia de Leon, the National Treasurer had confirmed that the 1.1 trillion Peso borrowing in 2019 will be the first time the government of the Philippines will exceed 1 trillion Pesos in borrowing. Though this should not be a source of concern to the populace, according to the treasurer.
According to the treasurer of the BOT, the debt to be borrowed is estimated at 1.1 trillion Pesos because the deficit will be higher than 624.73billion Pesos in 2019. Similarly, there will be some maturities on the debt by the year 2019. The government of the Philippines does borrow from both internal and external sources to pay maturing debts and to fix its budget deficits.
According to the Development Budget Coordination Committee (DBCC), the government of the Philippines will raise its fiscal deficit target by 624.73 billion Pesos which is roughly 3.2% of the country’s GDP. The higher spending requirement of the government, according to the Finance Secretary, is responsible for the raising of the Fiscal deficit target for 2019.
According to the Finance department, roughly 75% of the borrowings in 2019 are expected to come from domestic lenders. This according to the department is a 40% increase from 2018. Perhaps, there are certain benefits of borrowing from internal lenders, and that include lower interest rates.
Most of the Onshore or internal borrowings usually come in form of Treasury bills, as well as Treasury bonds and Retail treasury bonds. The remaining 297.2 billion Pesos of the 2019 borrowing will be sourced from the external lenders and that is roughly 14.1% lower than external borrowings recorded in 2018. While the DBCC reviewed upward the share of borrowing from external sources by 25% this year, it will review downward in 2019.
Multilateral institutions such as the world bank The Japan International Cooperation Agency and the Asian Development Bank are mostly responsible for government borrowings especially for the ongoing massive projects across the Philippines. In 2019, the government of the Philippine is looking to borrow from the Euro Bond market as well as the Panda Bond market.
Financial experts are also of the opinion that the debt profile of the Philippine may eventually become lowered as the Peso currency continues to rebound and strengthen against major world currencies. There have been growing concerns from western countries that the fact that over 85% of Philippines debts come from Asia which portends serious economic crisis in case the government defaults in repayment.