By Luisa Maria Jacinta C. Jocson, Reporter

THE National Government’s (NG) outstanding debt hit a record P14.24 trillion as of end-July due to higher domestic borrowings, the Bureau of the Treasury (BTr) said on Friday.

Preliminary data from the BTr showed outstanding debt inched up by 0.7% from P14.15 trillion at the end of June, “primarily due to the net issuance of domestic securities.”

Year on year, the debt stock rose by 10.5% from P12.89 trillion. It also increased by 6.2% from the P13.42 trillion as of end-December 2022.

Of the total debt portfolio, more than two-thirds or 68.9% came from domestic lenders, while the rest was sourced from foreign creditors.

As of end-July, domestic debt jumped by 11.1% to P9.81 trillion from P8.83 trillion in the same period a year ago

Month on month, domestic debt edged up by 1.1% from P9.7 trillion as of end-June.

At the end of July, domestic borrowings consisted almost entirely of debt securities.

“The increment in the domestic portfolio was attributed to the P110.39 net issuance of government bonds driven by the NG’s financing requirements, offsetting the P0.85 billion effect of local currency appreciation against the US dollar on onshore foreign currency-denominated securities,” the BTr said.

Data from the Treasury showed that the peso appreciated by 0.97% against the US dollar to P54.834 as of end-July from P55.368 as of end-June.

Meanwhile, external debt rose by 9.3% to P4.43 trillion from P4.06 trillion as of end-July 2022.

However, it edged lower by 0.3% from P4.45 trillion in end-June “due to the effect of peso appreciation against the US dollar amounting to P42.87 billion,” the BTr said.

“This more than offset the P9.97 billion net impact of third-currency fluctuations against the US dollar and P19.81 billion net availment of foreign loans,” it added.

Broken down, foreign debt consisted of P2.42 trillion in global bonds and P2.02 trillion in loans.

As of end-July, the NG’s overall guaranteed obligations inched down by 1.7% to P363.39 billion from P369.73 billion as of end-June.

Year on year, guaranteed debt declined by 10.9% from P408 billion in July last year.

“For the month, the decline in guaranteed debt was attributed to the net repayment of both domestic and external guarantees amounting to P5.30 billion and P0.21 billion, respectively,” the BTr said.

“In addition, peso appreciation against the US dollar further trimmed P1.67 billion, offsetting adjustments on third currency-denominated guarantees amounting to P0.84 billion,” it added.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said that the rise in NG’s outstanding debt continues to outpace gross domestic product (GDP) growth.

“The recent disappointing second-quarter GDP growth report underscores the challenges we face alongside the prolonged susceptibility to ratings actions from credit ratings agencies,” he said in a Viber message.

The Philippine economy expanded by a weaker-than-expected 4.3% in the second quarter, lower than the 6.4% in the first quarter and the 7.5% posted in the second quarter last year.

This brought GDP growth to 5.3% in the first half, well below the government’s 6-7% target this year.

“Rising debt could keep the debt-to-GDP ratio above 60%, which leaves the Philippines susceptible to action by ratings agencies,” Mr. Mapa added.

NG debt as a share of GDP stood at 61% at the end of June, lower than the 62.1% from the same period a year ago.

However, the ratio remains above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The government aims to bring the debt-to-GDP ratio below 60% by 2025.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said that elevated inflation bloated government expenditures. Higher interest rates also raised borrowing costs of the government, leading to an increase in debt.

Headline inflation stood at 4.7% in July, above the Bangko Sentral ng Pilipinas’ (BSP) 2% to 4% target for the year. Inflation in the January to July period averaged 6.8%, still above the central bank’s revised 5.6% full-year forecast.

The central bank has hiked benchmark interest rates by 425 basis points (bps) from May 2022 to March 2023 to curb inflation, bringing the key policy rate to a near-16 year high 6.25%