MANILA, Philippines – The national government’s outstanding debt will hit a record high of P13.41 trillion by the end of 2022, when the Ministry of Finance (DOF) said on Friday (July 9) that the recent loan trip would fund the long-running fight against health and socio-economic disaster inflicted on COVID-19.
Despite debt build-up across emerging markets, Oxford-based Oxford Economics said in a report that the Philippines, Colombia, India and Malaysia “have the most fiscal space; their existing plans (as calibrated by the International Monetary Fund) carry primary balances far in excess of those needed to stabilize debt. ”
“Existing fiscal plans, if implemented, would be more than sufficient to stabilize GDP debt [gross domestic product] at 2021 levels in Chile, Colombia, India, Indonesia, Malaysia, Mexico, the Philippines, Russia and Thailand, ”said Tianchen Peng, Oxford Economics’ head of macro research in emerging markets, in a report on 8 July last year.
The Philippines’ debt-to-equity ratio – a measure that credit rating agencies monitor as it reflects an economy’s ability to pay – rose to a 16-year high of 60.4 percent at the end of the first quarter of 2021 as the government raised loans while pandemic induced recession is sprayed over to that period.
The end of March debt to GDP level exceeded what debt watchdogs regarded as the manageable public debt threshold of 60 percent, but Finance Minister Carlos Dominguez III said in May last year that the ratio at the end of 2021 will equate to 58.7 percent of GDP, higher 54.6 percent in 2021 and record low 39.6 percent in 2019.
According to a DOF infographic, outstanding debt will reach P11.55 trillion by the end of the year, up from P9.79 trillion by the end of 2020. The total gross loans in 2021 will increase to P3.03 trillion from P2.65 trillion in 2020 and ease to P2.64 trillion in 2022.
Referring to estimates from the Treasury Bureau, DOF said that if COVID-19 had not happened, outstanding debt levels would have been lower – P8.59 trillion at the end of 2020, P9.35 trillion at the end of 2021 and P10 , 17 trillion by the end of 2022.
However, the COVID-19 crisis led to the filling of the war chest against the pandemic, thus larger loans than levels programmed by the government’s pre-pandemic, which only amounted to P1.4 trillion for 2020, P1.39 trillion for 2021 and P1.37 trillion for 2022.
DOF said that the larger loans by 2020, for example, will finance public infrastructure expenditure worth P989.28 billion, Expenditure on social services amounts to P1.49 trillion plus P492.59 billion. In COVID-19 response measures.
DOF also noted that borrowing costs measured by the weighted average interest rate (WAIR) fell to 4.17 percent in 2020 compared to 4.99 percent at the start of the Duterte administration in 2016.
“Our prudent debt management gave us the fiscal main room to deal with the pandemic. The expected temporary debt increase is within the prescribed limits of financial viability, ”Dominguez said.
“Rest assured that we will continue to be careful in managing our fiscal affairs. We want to protect our fiscal sustainability and ensure that we have an ample coffin for this long struggle, ”Dominguez added.
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