PH debt nears ₱9 trillion with surge in loans for pandemic response

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(FILE PHOTO)

Metro Manila (CNN Philippines, June 30) – The Philippines' total debt load has grown to ₱8.89 trillion in May as authorities borrowed aggressively to fund programs aimed at easing the effects of the coronavirus pandemic.

The Bureau of the Treasury reported Tuesday that total loans moved closer to ₱9 trillion, growing by 12.3 percent or ₱975.2 billion compared to May 2019. The figure also rose from April's ₱8.6 trillion level.

The Treasury said the spike is due to "increased reliance" on raising money through bond issuances as well as foreign loans as the state had to secure additional funds to support COVID-19 response measures, given a sharp drop in tax collections during the weeks under lockdown.

RELATED: Government collections by end-May plunge amid COVID-19 pandemic

Two-thirds of the debt burden was borrowed locally, amounting to ₱6.03 trillion which is 14.8 percent higher than a year ago. The bureau was forced to issue more Treasury bonds and bills as it sought to pad the government's cash for emergency purchases and benefits as the country saw coronavirus infections climb.

Treasury note issuances have climbed to ₱5.73 trillion, up by a tenth from last year and by 3.1 percent compared to April.

Foreign sources accounted for 32 percent of the total loans at ₱2.86 trillion as of end-May. The figure rose by 7.4 percent from the year before, representing the series of loans secured from four development finance agencies abroad to bolster local funding.

Peso-dollar exchange rate movements also added to the debt burden, the bureau added.

RELATED: DOF says nearly half of $4.8B foreign loans released for COVID-19 response

As a developing economy, the Philippines spends more than what it can collect in funding so that it can begin new and high-impact projects – in this case, the coronavirus response, with cases surging to more than 37,000 as of end-June.

The Department of Finance earlier said that public debt will not go beyond 50 percent of the size of the Philippine economy to make these loans manageable to settle. The agency is looking to borrow ₱436.9 billion from foreign sources to support government spending for coronavirus response measures.

The government has set aside ₱465.88 billion to settle maturing loans for the month.