Philippines: Government to settle debt to BSP before new administration

MANILA, Philippines — The Duterte administration plans to clear its debt with the Bangko Sentral ng Pilipinas (BSP) before the end of its term, the country’s finance chief said.

Finance Secretary Carlos Dominguez III yesterday said they have taken the initial step in the consolidation plan it will pass on to the next administration by clearing the government of any BSP debt by June.

“The DOF is preparing a transition plan. We have a lot of items that have been finished, a lot of items that have not been finished. We may have ideas toward fiscal consolidation,” Dominguez said in an online forum with the Tuesday Club.

“We are starting our fiscal consolidation already. We owed the central bank P540 billion and we have reduced that to P300 billion, and we will further reduce that to zero by the end of June,” he said.

Last December, the government paid the P540 billion in provisional advances it borrowed from the BSP to cut its outstanding debts owed to domestic and foreign creditors. The payment was made one month ahead of the extended deadline in January.

Further, the government decided to trim its provisional advances from the BSP to P300 billion. Under Republic Act 7653 or the New Central Bank Act, the BSP may give provisional advances to the government, with or without interest, to finance expenditures listed in the yearly program.

The DOF, however, looks to bring down the borrowing volume moving forward as it expects revenue collections to pick up pace and shoulder the bulk of state spending.

Dominguez said he would leave it to the next administration to decide whether new taxes like the proposed tax on carbon waste should be slapped. Likewise, he said the next administration should concern itself on how it can fund pandemic programs without bloating the debt pile any further.

The next administration will find itself in a tight spot organizing its finances for its six-year term as the national debt has risen to a level that the international community may find alarming. The debt stock grew by nearly 20 percent to P11.73 trillion in 2021 from P9.8 trillion in 2020.

The national debt, when measured against the gross domestic product (GDP), ballooned to 60.5 percent, from 54.4 percent in 2021, according to the Bureau of the Treasury.

As such, the debt-to-GDP ratio has surpassed the government’s target of 59.1 percent and the European standard of 60 percent, which credit monitors and multilateral lenders use as a metric to assess an economy’s capacity to repay debts.