Gov’t 2022 debt down on peso appreciation, economic recovery

The continued recovery of the domestic economy, along with the strengthening of the Philippine peso against the US dollar, helped reduce the peso value of the national government’s (NG) total liabilities by end-2022 to P13.42 trillion compared to the previous months.  

The Bureau of the Treasury (BTr) said Thursday the full-year NG debt went down by P225.31 billion, or 1.7% from P13.64 trillion by end-November last year, also due to the net redemption of domestic government securities (GS).

NG debt, however, grew by 14.4%, or P1.69 trillion, compared to P11.73 trillion in end-2021.

Of the total, domestic debt accounted for 68.62% of the total debt last year amounting to P9.21 trillion which declined by 2.3% or P219.58 billion, compared to P9.43 trillion as of end-November last year. 

The BTr attributed the decline to the net redemption of P217.95 billion worth of GS and the peso appreciation, which reduced by P1.63 billion the peso value of foreign currency-denominated liabilities.

Foreign debt accounted for 31.38% of NG liabilities amounting to P4.21 trillion as of end-2022, lower by P5.73 billion from the end-November 2022 level. It had increased by P652.34 billion since the start of 2022, it said.

The BTr said currency adjustments due to the appreciation of the peso against the dollar reduced the foreign debt by P58.34 billion, and the

improvement of the level of NG debt last December and the continued robust growth of the domestic economy resulted in the decline of the country’s debt-to-GDP level.

The country’s gross domestic product (GDP) expanded by 7.2% in the last quarter of 2022 and by 7.6% for the full year.

The share of NG liabilities to domestic output went down to 60.9% as of end-2022 from 63.7% at the end of the third quarter last year and is lower than the 61.8% target in the government’s medium-term fiscal framework.

“This reflects the consistent drive to bolster debt sustainability through prudent cash and debt management backed by resurgent economic growth,” the BTr said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said he expects the sustained growth of the domestic economy and the impact of tax and other fiscal reform measures to be of advantage to the improvement in the share of debt to economic growth.

“More disciplined government spending would help further reduce/improve the debt-to-GDP ratio to below the 60 percent international threshold to help sustain the country’s favorable credit ratings at 1-3 notches above the minimum investment grade,” he said in a report on Thursday.

Ricafort said government debt is expected to further increase in the coming months in line with the government’s plan to issue new peso-denominated Retail Treasury Bonds (RTBs) and new US dollar-denominated RTBs as part of the program to raise necessary financing for various government programs and projects.

He said the government thus needs to “further intensify tax revenue collections based on existing tax laws, come up with new taxes/tax reform measures, increase tax rates, among others, to further boost structural sources of government revenues.”

It can also adopt more disciplined spending through fiscal reform measures, such as right-sizing the government and anti-corruption/anti-leakage/anti-wastage measures, he added.

“All of which would help further narrow/improve the budget deficit and, in turn, slow the growth/increment in the national government’s outstanding debt, as well as better prepare for eventual payment of the large debt/borrowings incurred during the pandemic as they fall due in the future,” Ricafort said. (PNA)