The Bureau of the Treasury reported Friday that the country’s total outstanding debt as of end-January 2022 increased by P301.12 billion or 2.6 percent to a record P12.03 trillion.
Of the total debt, 30.4 percent or P3.66 trillion came from foreign sources while 69.6 percent or P8.37 trillion were domestic borrowings.
The Treasury Department said the external obligations rose 2.9 percent from the previous month as the government took out P94.88 billion in foreign loans and as the peso depreciated against the US dollar, adding P11.23 billion to the debt.
Domestic debt, on the other hand, rose 2.4 percent from the end-December 2021 level to P9.37 trillion for the month.
The Philippines borrowed heavily in the last two years to deal with the COVID-19 pandemic.
The borrowings pushed the country’s debt-to-GDP (gross domestic product) to over 60 percent in 2021, but Bangko Sentral ng Pilipinas Governor Benjamin Diokno said this was not a cause for concern, because most of the country’s pandemic loans have long and medium-term repayment schemes with low interest rates.
The country’s debt-to-GDP ratio was at 40 percent before the COVID-19 pandemic but it shot up over the past two years as the country borrowed about $10 billion to fund its pandemic response, Diokno told the ANC news channel.
Remarking on the ballooning debt, Micahel Ricafort, chief economist at the Rizal Commercial Banking Corp., said the government needs to exert efforts to increase tax collections to maintain the country’s debt and budget deficit at manageable levels.
In 2021, the government posted a budget deficit of P1.67 trillion, 21.78 percent higher than the P1.37 trillion deficit in 2020, as the 10.60 percent expansion in expenditures outpaced the 5.24 percent increase in revenues.
Ricafort said the government could increase tax revenues by intensifying its collection efforts, instituting tax and fiscal reforms, and cracking down on corruption to reduce government losses.
He added that the country’s high debt-to-GDP ratio was largely brought about by the COVID-19 pandemic, which reduced GDP by -9.6 percent in 2020 and increased government spending, especially on various COVID-19 programs.
Ricafort said the country’s debt-to-GDP ratio is still expected to be around the internationally acceptable threshold of 60 percent of GDP, especially if GDP continues to recover in the coming months, thereby giving the government greater leeway to increase spending, budget deficits, and overall debt to pump-prime the economy.
Meanwhile, the Philippine Chamber of Commerce and Industry (PCCI) said I was optimistic that the country’s credit rating would not be affected by its debt standing.
“I think our credit rating will be stable. This means we can still put out loans at reasonable interest rates, especially for businesses in dire need of financial help,” said PCCI Chairman George Barcelon.
Other countries like Japan, Singapore, and the US have even higher debt obligations relative to the Philippines, he said.
“Ours is still manageable. What is important here, is that we should be able to recover from the COVID pandemic. After all that’s the reason why we fell further into debt,” Barcelon said.
PCCI members, he said, are wary of the possibility of tax hikes, although the expectation is that taxes will remain at the same level, at least until after the May elections and the new administration settles in.
Any new taxes, he said, would likely be targeted at vices such as tobacco, alcohol and gambling.
“Gambling, for sure will be looked into. It has been a hot topic in the local legislation scene and may be further pursued by the incoming administration, as an added source of revenue, now that POGOs are slowly getting into the game, again,” he said, referring to Philippine Offshore Gaming Operators.
Barcelon said the business community does not want higher taxes as these would put a damper on investments.
