Gov’t borrowing up 43% in July
THE National Government’s (NG) gross borrowing rose 43% year on year in July as the budget deficit widened in recent months, the Bureau of the Treasury (BTr) said.
The BTr reported that gross borrowing in July rose to P188.65 billion from P131.94 billion a year earlier.
Month on month, gross borrowing rose 27.32% from June.
Nearly all of July’s gross borrowing (95.73%) was domestically sourced.
Domestic debt rose 63.43% year on year to P180.59 billion in July.
Gross domestic borrowing for the month included P155 billion in fixed-rate Treasury bonds and P25.59 billion in Treasury bills (T-bills).
Gross external borrowing declined 62.39% year on year to P8.06 billion in July, the BTr said.
In the seven months to July, gross borrowing rose 15.49% to P1.76 trillion. Some 84.34% was borrowed from domestic sources.
Gross domestic borrowing rose 30.69% year on year to P1.48 trillion at the end of July.
Domestic debt during the period consisted of P764.21 billion in fixed-rate Treasury bonds, P584.86 billion in retail Treasury bonds, and P134.66 billion in T-bills.
On the other hand, external gross borrowing dropped 28.98% to P275.48 billion in the seven months to June.
This consisted of P115.25 billion in global bonds, P100.5 billion in program loans, and P59.73 billion in new project loans.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said widening budget deficits required the government to borrow more.
In the first seven months, the NG’s budget deficit widened 7.2% year on year to P642.8 billion.
Debt service costs also rose amid the peso’s continued weakness since 2022, Mr. Ricafort said.
The peso closed at P58.365 at the end of July, strengthening by 24 centavos from the end of June, according to the Bankers Association of the Philippines.
“For the coming months, further local and Fed rate cuts and a stronger peso recently could help reduce the NG’s debt service costs, but (debt remains) a function of the budget deficit trend for the coming months,” Mr. Ricafort said via Viber.
Last month, the Monetary Board eased interest rates by 25 basis points (bps) to 6.25%, from an over 17-year high of 6.5%.
The Bangko Sentral ng Pilipinas could deliver another 25-bp rate cut in the fourth quarter, Governor Eli M. Remolona, Jr. has said.
The Federal Reserve could begin its easing cycle as early as this month, Chairman Jerome H. Powell said on Aug. 23.
“Higher borrowing can be typically attributed to lagging revenue collection in the course of the fiscal year, as revenue becomes insufficient to cover the expenditure requirements of government,” Terry L. Ridon, a lawyer and convenor at think tank InfraWatch PH, said via Viber.
“However, for as long as government keeps within or close to the 60% standard of debt-to-GDP ratio, it should not be a serious cause of concern,” he said.
The NG’s debt-to-GDP ratio was 60.9% at the end of June. This is above the 60% threshold deemed manageable for developing countries, according to international development banks.
Despite this, the government should find ways to keep its borrowings within the threshold, Mr. Ridon added.
The debt-to-GDP ratio is projected at 60.6% by the end of 2024 from 60.1% in 2023, BTr said.
This year’s borrowing plan is set at P2.57 trillion, with P1.92 trillion from domestic sources and P646.08 billion from foreign sources, according to the Budget of Expenditures and Sources of Financing data. — Beatriz Marie D. Cruz