Philippines debt nears P14 trillion

MANILA, Philippines — The country’s outstanding debt is closing in on the P14-trillion level, putting more pressure on the Maharlika Investment Fund (MIF) to finance major infrastructure projects and eventually trim government obligations.

Latest data from the Bureau of the Treasury showed the national debt reached a fresh record high of P13.91 trillion in end-April, inching up by 0.4 percent from P13.86 trillion the previous month.

On a yearly basis, however, the debt stock picked up by nine percent from P12.76 trillion.

For April alone, the government added P54.24 billion in fresh obligations due to the net issuance of external debt and the local currency depreciation against the US dollar.

With this, the running debt incurred by the Marcos administration stood at P1.11 trillion in 10 months. The current debt pile is now about 95.08 percent of the expected P14.63 trillion debt by end-2023.

The latest debt data comes a day after the controversial MIF bill hurdled the Senate, allowing it to inch closer to enactment into law.

According to Leonardo Lanzona, economist and professor at the Ateneo De Manila University, part of the reason for making the MIF a priority is the country’s huge debt.

As such, he said most of the flagship projects are being delayed in exchange for the payment of these debts.

Now, President Marcos and his economic team are positioning Maharlika as a source to bankroll infrastructure projects in order to cut down borrowings. Such is not certain though.

“There is no assurance since these funds will still be invested in presumably high-earning but risky instruments. But it still gives the government additional options,” Lanzona told The STAR.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion warned that with the current backdrop, it may be a challenge to finance the Maharlika Fund in the coming months.

“Unless our lawmakers have already indicated in the law where and how the fund will be supported. This might take some time until the prevailing environment becomes more favorable,” Asuncion told The STAR.

Still, Lanzona said the MIF is putting the integrity of the government’s financial institutions at risk, especially if the fund does not produce the needed returns that the GFIs are expecting.

“If not, these institutions will not function as they are mandated to do. If the returns are just enough, then we’re back to square one with huge debt,” Lanzona said.

“The Maharlika then is faced with a lot of pressure,” he said.

Following the Senate’s approval, Finance Secretary and economic team head Benjamin Diokno said the latest version reflects the administration’s objective of creating a profitable and secure investment fund.

Budget Secretary Amenah Pangandaman, for her part, maintained that the MIF is a “great stride toward long-term progress and will boost efforts for economic growth.”

Meanwhile, the Treasury said the majority or 68 percent of the debt pile were domestic borrowings and the remaining 32 percent were sourced externally.

Total domestic debt at P9.46 trillion went down slightly by 0.6 percent on a monthly basis, but jumped by 5.8 percent from the P8.94 trillion in April 2022.

This is due to the net redemption of domestic securities worth P57.79 billion. However, this was slightly offset by the P2.47 billion effect of local currency depreciation against the US dollar on onshore foreign currency-denominated securities.

External obligations, on the other hand, increased by 2.5 percent to P4.45 trillion month-on-month. It rose by 16.4 percent from P3.83 trillion on a yearly basis.

The Treasury said the increase in external debt was due to the P27.98 billion net availment of external loans and P94.28 billion impact of local currency depreciation against the US dollar.

Third-currency adjustments versus the US dollar also trimmed P12.3 billion from the peso value of foreign currency debt.

Meanwhile, total debt guaranteed obligations went down by 0.9 percent to P380.69 billion due to the net repayment of domestic guarantees amounting to P5.51 billion and third-currency adjustments worth P1.87 billion.