According to the latest data from the Bureau of Treasury, the outstanding debt of the national government (NG) has reached a record high of P14.09 trillion as of the end of May.

This represents an increase of P185.4 billion compared to the previous month, driven by additional domestic and foreign debt, as well as the depreciation of the peso.

The majority of the outstanding debt, around 68.0 percent, is attributed to local borrowings. It amounts to P9.59 trillion, a 1.38 percent increase compared to the end of April, primarily due to the net issuance of government securities totaling P129.11 billion. The weakening of the peso against the US dollar also contributed to a P1.56 billion increase in the value of onshore foreign currency-denominated securities.

Year-to-date, domestic debt has risen by P380.13 billion or 4.1 percent, as reported by the Bureau of Treasury.

Meanwhile, external debt, which accounts for 32 percent of the total outstanding debt, has reached P4.50 trillion. This represents a 1.2 percent or P54.7 billion increase from the previous month. The rise in external debt is primarily driven by the net availment of external loans amounting to P10.05 billion and the impact of local currency depreciation against the US dollar amounting to P59.70 billion. However, third-currency adjustments against the US dollar have reduced the value of foreign currency debt by P15.02 billion.

Compared to the end of December, external debt has increased by 7.1 percent or P297.55 billion.

The total amount of guaranteed obligations stands at P379.71 billion as of the end of May, showing a 0.3 percent decrease compared to the previous month.

The decline in guaranteed debt is attributed to the net repayment of external guarantees totaling P6.70 billion and third-currency adjustments amounting to P0.91 billion. However, these reductions were partially offset by the net issuance of domestic guarantees worth P4.16 billion and the impact of local currency depreciation relative to the US dollar amounting to P2.47 billion.

Domestic guaranteed debt has reached P200.73 billion, a 2.11 percent increase from the previous month’s P196.57 billion, while external guaranteed debt now totals P179 billion, slightly down from April’s P184.11 billion.

Compared to the end of December 2022, NG guaranteed debt has decreased by P19.33 billion or 4.8 percent.

Michael Ricafort, Chief Economist at Rizal Commercial Banking Corp., suggested that the recent net borrowings by the national government reflect the necessity to finance budget deficits in recent months.

He added that lower individual tax rates for most income brackets since the beginning of 2023, under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, have contributed to reduced government revenues.

Ricafort predicts that further record highs are likely, especially with the upcoming issuance of US dollar or euro-denominated retail bonds in the third quarter of 2023.

He also anticipates that the outstanding national government debt could increase further, particularly if government borrowings are front-loaded in early 2023 to finance the budget deficit.