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Philippine Debt Is Now at P8.6 Trillion. What Does That Mean?

We all owe about P86,000.
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The Philippine government’s outstanding debt is now at a cool P8.6 trillion as of April 2020, up by 10.4 percent from the P7.8 trillion during the same period last year. 

According to Businesmirror, latest data from the Bureau of the Treasury showed that the end-April figure increased by P122.9 billion or 1.5 percent from P8.477 trillion as of end-March this year mostly due to domestic securities issuance and external loan availments.

It’s hard enough to imagine P1 billion, let alone P1 trillion. The figure of P8.6 trillion boggles the mind. We thought we’d try to visualize just how big this amount is and figure out exactly what that means.

First, we need to convert it to US dollars in order to more adequately compare it to worldwide figures. At today’s exchange rate, P8.6 trillion is roughly $171.8 billion. At that number, Philippine debt is bigger than the entire GDP of certain countries. For example, according to the International Monetary Fund World Economic Database dated April 2019, the GDP of the Ukraine, Kuwait and Morocco stood at $147 billion, $143 billion, and $129 billion respectively.

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The national debt is also over four times bigger than some of the largest listed companies in the Philippines. According to Forbes magazine’s 2020 Global 2000 (or its list of the world’s largest public companies), the seven Philippine companies on the list are: SM Investment Corp (market value of $20.2 billion), BDO Unibank (8.8 billion), Top Frontier Investment Holdings (majority shareholder of San Miguel Corp, $930 million), Ayala Corp. ($7.2 billion), JG Summit Holdings (7.2 billion), Metropolitan Bank and Trust (3.5 billion), and the LT Group ($1.7 billion). Added together, that’s just $42.53 billion.

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How much is a trillion

One trillion pesos is equivalent to about $20 billion. How long would it take you to save even $1 billion? Well, say, you saved $100 (about P5,000) every day. Then it would take you 10 million days (or about 27,387 years) to get to $1 billion. So for $20 billion, that’s a total of 200 million days, or roughly 547,945 years.

Put another way, based on the current Philippine population of roughly 100 million, every Filipino would need to cough up $200 (P10,000) to reach $20 billion or P1 trillion. And if the debt is P8.6 trillion or $171.8 billion, then each Filipino owes roughly P86,000.

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One other way to make sense of this number is to look at the debt-to-GDP ratio, which is essentially the metric that compares how much a country owes to how much it produces. According to Investopedia, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts.

“A country able to continue paying interest on its debt—without refinancing, and without hampering economic growth, is generally considered to be stable,” Investopedia adds. “A country with a high debt-to-GDP ratio typically has trouble paying off external debts (also called “public debts”), which are any balances owed to outside lenders. In such scenarios, creditors are apt to seek higher interest rates when lending. Extravagantly high debt-to-GDP ratios may deter creditors from lending money altogether.” 

The Philippines’ average debt-to-GDP ratio was at 55.27 percent from 1990 until 2019, according to TradingEconomics.com. It reached an all-time high of 74.90 percent in 1993 and a record low of 41.5 percent in 2019. This year however, economists forecast debt-to-GDP to hit 50 percent, which, according to the National Economic Development Authority, is “far lower than the most recent peak of 71.6 percent in 2004.”

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We’re somewhere in the middle in a list of countries ranked based on debt-to-GDP ratio. The top five includes Japan (237 percent), Venezuela (214 percent), Sudan (177 percent), Greece (174 percent), and Lebanon (157 percent).

Comparing debt to national budget

Finally, it’s worth noting that the country’s approved national budget for 2020 was P4.1 trillion, the country’s largest ever in its history. Eleven percent of that, or about P451 billion, will go to debt servicing. Meanwhile, the Bureau of Internal Revenue reported that its collections total stood at P2.17 trillion for 2019. The number was up 10.7 percent from P1.96 trillion from the previous year. 

Although the BIR said that still wasn’t enough to hit its collection target of P2.33 trillion for 2019, it’s still a tidy sum when you compare it against the country’s total debt.

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About The Author
Paul John Caña
Associate Editor, Esquire Philippines
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