By: Elena Grace Flores
Contrary to the Liberal Party’s Press Releases: The country’s external debt under President Aquino has not diminished but instead has kept growing as it hit $77.64 billion until March, up by $166 million, or 0.2 percent higher, from $77.5 billion by the end of last year. The figures are expected to rise further under the coming Duterte administration as Budget Secretary-designate Benjamin Diokno plans to source higher budget allocations to fund a massive infrastructure buildup from foreign borrowings citing the conducive climate for borrowing with the current low interest rates mainly as a result of the country’s investment grade from rating agencies.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco said the higher debt stock can be attributed to foreign exchange (FX) revaluation adjustments that contributed $814 million to foreign debts and previous periods’ adjustments and increased investments in Philippine debt papers by non-resident investors which tacked $833 million to total debts.
Net repayments of $1.5 billion, mainly by banks, partly mitigated the upward impact of these developments on debt stock, he said. Diokno said that he is considering a budget deficit of three percent of gross domestic product (GDP) or P420 billion a year to inject more funds into the economy.
The budget deficit under Diokno’s plan will be the widest since the record P314.46 billion deficit in 2010.
In contrast, the outgoing administration of President Aquino has limited the budget deficit at two percent of GDP but which was the result of massive underspending that stunted economic growth. “A deficit-to-GDP ratio of three percent is manageable, especially if the higher deficit will be used to fund infrastructure,” Diokno said. He said the Philippines lags behind its neighbors in Southeast Asia in terms of public spending for infrastructure projects. Diokno said credit-rating companies shouldn’t be alarmed at the higher fiscal shortfall since the country’s debt is already low as a percentage of economic output, most of the debt is now in local currency, and the economy has a steady stream of foreign exchange.