Sep 302016

Liabilities already climbed 0.4 percent since the start of 2016. photo

MANILA, Philippines – A stronger peso in August tempered the national government’s (NG) debt burden in the first eight months, but this could prove to be just a blip and may hit a record-high this month as the local currency slumped.

The debt pile amounted to P5.98 trillion as of August, down 0.04 percent from P5.982 trillion in the first seven months, data from the Bureau of the Treasury showed.

Since the beginning of the year, however, liabilities already climbed 0.4 percent. Obligations are compared every month than year-on-year since they add or subtract to an existing pile.

“For the month, NG debt slightly declined…from its end-July level due to currency revaluation,” Treasury said in a statement on its website.

In particular, the government computed its debts using an average peso-dollar exchange rate of 46.552, much stronger than July’s 47.09.

This, in turn, lowered the value of external liabilities, more than 60 percent of which were denominated in US dollars. They went down 1.4 percent to P2.1 trillion, data showed.

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“For August, forex (foreign exchange) adjustments on US dollar- and third-currency-denominated debt reduced the peso value by P2.19 billion…,” Treasury said.

In addition, the government settled than secured more external debts during the month for a net repayment worth P3.13 billion. 

Lower foreign obligations more than offset the 0.7-percent increase in their domestic counterparts to P3.88 trillion, data showed.

This is “in line with the net issuance of government securities,” which means more Treasury bonds and bills were issued to finance the budget deficit or pay existing debts.

Sought for comment, Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said the peso’s plunge to the P48-to-a-dollar level this month could increase debts for September.

The local unit stayed at a seven-year-low against the greenback for much of last week, closing 48.33 on Thursday. 

It traded at a weaker average of 48.47 at noon on Friday. Trading has not closed as of this post.

“That decline will reverse because the peso fell more in September than it gained in August. (This) means peso value (of debt) will increase by a bigger amount,” Neri said in an e-mail on Friday. 

“It may cross the P6-trillion mark,” he said.

“The good thing (though) is this administration wants to do a 80/20 (borrowing) mix,” he said, pertaining to 80 percent domestic borrowings and 20 percent external.

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