By PressOnePH Business

The government paid up some debts in June, but this was not enough to slow down the pace by which the Duterte administration is accumulating liabilities, the Bureau of the Treasury said in a report on Friday.

Interestingly, the state’s debt stock likely grew faster than the economy as of the first half of the year, putting at risk goals to keep a ballooning debt pile sustainable by keeping economic growth healthy.

According to the Treasury report, the national government incurred a total of P7.87 trillion in liabilities as of end-June, 0.6 percent lower than the previous month’s level.

While liabilities decreased on a monthly basis, the debt stock remained on a rising trend so far this year as the government bridges its budget deficit capped at P624.4 billion this year. Worse, liabilities likely grew faster than the economy in the first half of the year. Treasury data showed government obligations have risen 7.9 percent from end-2018.

In comparison, the economy, measured according to gross domestic product (GDP), grew 5.6 percent in the first quarter in real terms, and 7.4 percent in nominal terms. While Socioeconomic Secretary Ernesto Pernia said GDP growth likely accelerated to above 6 percent in the second quarter, this was unlikely to be sufficient to outpace rising debts.

Debt itself is not bad since funds are being used to finance public projects, but since the Duterte administration took office in 2016, it vowed to keep debt sustainable by making sure the economy grows faster than it borrows.

In that way, it is able to keep the debt-to-GDP ratio low even as it accumulates more debts. The ratio stood at 41.9 percent last year, down from 42.1 percent in the preceding two years.

President Rodrigo Duterte’s economic managers want the debt ratio to further slide to 38.6 percent by the end of his term in 2022 even as they borrow and spend more for infrastructure under the “Build, Build, Build” program.

More local than foreign debts

According to the Treasury, the slight month-on-month decline in liabilities was “due to net repayments of both domestic and foreign loans and foreign exchange fluctuations” that saw a stronger peso against the dollar pushing down the value of foreign liabilities.

Broken down, foreign debts decreased 3.2 percent month-on-month to P2.57 trillion. The peso averaged P51.2 to a dollar in June, stronger by P1 than its level in May, making debts cheaper.

The drop in external obligations more than offset a 0.7-percent increase in peso-denominated liabilities to P5.29 trillion, data showed.

As a percentage of total debt stock, domestic liabilities still cornered most of the pie at 62.9 percent, versus foreign debts’ 37.1 percent share.