As fiscal space compresses, borrowings bloat

PHILIPPINES - In Brief 17 Oct 2024 by Diwa Guinigundo

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It’s not surprising that the Philippine National Government (NG) should further increase its borrowings both from the local and external capital markets. With revenue collections amounting to P2.993 trillion for the first eight months of 2024, equivalent to 17.1% of GDP, and expenditures totaling P3.69 trillion or nearly 22% of GDP, the country’s fiscal deficit at P697 billion is now 4.9% of GDP from 4.8% for the same period in 2023. Domestic borrowings funded P1.53 trillion of public spending while external borrowings covered P121 billion, on a net basis—meaning some borrowings were used to service older loans. The rest came from cash drawdown from NG’s cash reserves. Thus, at end-August 2024, NG’s total debt stood at a whopping P15.55 trillion, nearly three times the average annual budget. At such a level, NG debt is around 61% of GDP for the first half of 2024. But the debt service payments have also been rising. For the first eight months of 2024, total debt service aggregated P915 billion versus year-ago’s P459 billion, or nearly double. As we wrote recently, with the urgency of funding next year’s P6.352 billion, the Department of Finance has ordered through Memorandum Circular 003-2024 Government-Owned or Controlled Corporations (GOCCs) including the Philippine Health Insurance Corporation (PhilHealth) to remit their “unused” funds. Opposed by at least three big groups including former senior government officials, the directive appeared to have missed out on the failure of some government corporations to fully implement their mandate. Hence, the “unused” funds. In the case of PhilHealth, if it expanded the health coverage of its members, or reduced the members’ ...