Thursday, August 08, 2024

BWorld 721, The Philippines’ public debt stock and debt transparency

The Philippines’ public debt stock and debt transparency

July 9, 2024 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/07/09/606752/the-philippines-public-debt-stock-and-debt-transparency/

I am tackling two topics in this piece, so let us go straight to the numbers.

Our public debt is approaching P16 trillion.

Last week the Bureau of the Treasury (BTr) announced the public debt stock for May 2024. The actual debt was P15.35 trillion, 68% of it — or P10.44 trillion — is domestic debt. If guaranteed debt is included, our total public debt is P15.7 trillion.

I compared the numbers with those of recent years, all during May for consistency of comparison. The biggest increase in actual debt was P2.18 trillion from May 2020 to May 2021, or a 24.5% increase in just one year. There are two emerging trends.

One, there is a declining expansion in debt, from 24.5% in 2021 to only 13% in 2022 and 2023, and only 9% in 2024. This is good.

Two, there has been continued high expansion in external loans, with an average 18.4% annual increase from 2020 to 2024. We are borrowing more from the multilaterals (see Table 1).

The main cause of the continued expansion of our public debt despite high GDP growth is that National Government expenditures keep rising fast, and the high interest rates that push our interest payment even higher. For instance, the interest payment (principal amortization not included yet) of our public debt was P502 billion in 2022, P582 billion in 2023, and is projected to be P670 billion this year. The actual interest payment from January-May 2024 was already P321.6 billion, or an average of P64 billion/month. If this rate continues, our full year 2024 interest payment would be P770 billion, much larger than the P670 billion target. We need to grow 6-7% yearly so that revenues expand in step with GDP expansion.

Department of Finance (DoF) Secretary Ralph G. Recto noted the link between growth and fiscal targeting. At the Economic Journalists Association of the Philippines (EJAP)-SMC Economic Forum yesterday, July 8, Mr. Recto said that “Since fiscal goals are anchored to growth targets, setting high GDP targets amidst external headwinds risks a revenue shortfall. This would strain our deficit and potentially increase borrowing. But tempering these targets does not diminish our commitment to fiscal consolidation. Instead, it reflects a confident and conservative approach to fiscal policy-making.”

Department of Budget and Management (DBM) Undersecretary and Principal Economist Joselito R. Basilio agreed with this assessment and made an optimistic note that “The current trajectory, maturity profile, and currency mix of both debt level and Debt-to-GDP ratio remain consistent with the planned fiscal consolidation of the government. If macroeconomic conditions continue to improve, Debt-to-GDP ratio should peak in the next two to three years. Debt levels should peak within the decade.”

Very well, gentlemen. And I really wish that the economic team can persuade the Bangko Sentral to reverse and cut that behemoth of a high interest rate policy very soon. It is a cruel chain that is dragging money from our pockets to the National Treasury direct to the lenders.

PHILIPPINES TOPPED THE DEBT TRANSPARENCY REPORT
Also last week, the Institute of International Finance (IIF) released the “IIF 2024 Investor Relations and Debt Transparency Report.” The IIF is a global association of private finance and investment companies based in Washington, DC. Some 23 factors were considered in the report, and 50 countries were covered. The result is good — the Philippines ranked first in both Investor Relations (maximum score is 13) and Debt Transparency (maximum score is 50) components. Indonesia also scored high, but not the other ASEAN countries (see Table 2).

The DoF highlighted this in their website and social media press releases. Mr. Recto said that “It is very encouraging to see that the Philippines is setting a global benchmark in investor relations and debt transparency… Transparency is most important, especially regarding government debt. We release data regularly to clearly show the public where their taxes and our borrowings go.”

I agree that the Philippines is very transparent when it comes to budget and public debt data. I particularly like the DBM’s Budget of Expenditures and Sources of Financing (BESF) report that they submit to Congress yearly, usually in August. One table there, on “Budget sensitivity to macroeconomic parameters,” shows that a 1% increase in GDP growth can lead to a P33 billion increase in revenues and budget balance.

It is important to have sustained high growth, and an expansion in GDP size which should outgrow the expansion in public debt stock. And the Bangko Sentral should help by abandoning its high interest rate policy.

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Deindustrialization 25, Jobless non-growth in Germany and UK

We often hear or read the term "jobless growth." People who often use that term should see these charts. That term is an oxymoron while this "jobless non-growth" is real.

And not only Germany, also the UK. Preoccupied with save the planet, save the illegal immigrants, save Ukraine, save DEI. But cannot save their own economies from degrowth and deindustrialization.

Charts source: Trading Economics

The PH has jobs-creating growth. And it's real.

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Deindustrialization 24, UK and Germany degrowth and high food inflation, February 10, 2024

BWorld 720, Coal power and the Meralco CSP

Coal power and the Meralco CSP

July 4, 2024 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/07/04/605910/coal-power-and-the-meralco-csp/

This week two groups attempted to advance their degrowth and blackout agenda with their nefarious lobbying. The London-based renewables lobby group Ember-Climate called out the Philippines’ and Indonesia’s high coal dependency and the self-styled “consumer group” Power for People Coalition (P4P) called out Meralco for securing cheap electricity sources for its consumers.

Good thing that our Department of Energy (DoE) is not falling for these groups’ agenda. See these recent reports in BusinessWorld: “Coal-fired plants can support PHL baseload needs until 2030 — DoE” (June 19), “Philippines’ dependency on coal-fired power surpasses China, Indonesia” (July 1), and, “Consumer group files petitions vs Meralco’s supply contracts” (July 3).

We go straight to the numbers.

I checked the coal consumption and “coal dependency” of major industrial economies and some ASEAN countries. In 2023, the Philippines had 70 terawatt-hours (TWh) of coal power generation while Germany had 128 TWh, Japan had 304 TWh, the US had 738 TWh, India had 1,471 TWh, and China had 5,754 TWh. Ember had not called out or bullied these countries — or South Korea and Australia — for their high coal use until last year.

Meanwhile, the Philippines’ coal/total generation ratio in 2023, was 58%, Indonesia’s was 62%, Poland’s was 60%, China’s was 61%, and India’s was 75%. But Ember has not called out Poland, China, and India — they cannot bully these countries, but they can bully Indonesia and the Philippines. The reason why Philippines has a ratio of 58% is because the denominator, our total power generation, is small.

Then I checked the economic performance of these countries, there is a trend: countries with a declining coal/total generation ratio of 30% or lower in 2023 had low average growth — Germany, the UK, the US, Canada, Japan, and Thailand. And those countries with coal/total generation ratios of 42% or higher have fast average GDP growth of 3% or higher — Turkey, Poland, China, India, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam. Australia is an exception with average growth of only 2.4% (see Table 1).

So Ember-Climate is happy that the decarbonizing UK and Germany are suffering degrowth, with GDP performances in 2023 and Q1 2024 of only 0.1% and 0.3% respectively for the UK, and -0.3% and -0.2% respectively for Germany, so long as they keep reducing their use of coal and nuclear energy while raising their wind-solar capacities. And they want the Philippines, Indonesia, and other developing countries to be bullied into following the UK and German model. Shame.

Next, P4P petitioned the Energy Regulatory Commission to reject Meralco’s two successful competitive selection processes (CSP) that will give Meralco consumers cheaper electricity. They think that the P7/kWh generation charge is wrong and must be rejected because P8.45/kWh or higher is good and must be entertained and passed on to the consumers? What an idiotic way of thinking. (see Table 2.)

Meralco Vice-President and Head of Corporate Communications Joe R. Zaldarriaga correctly argued that “The CSPs involve an open and competitive process with the ultimate goal to secure the lowest bid from qualified generation companies, with no preferential treatment. Thus, the allegations that contracts emanating from CSPs are anti-competitive have no basis.”

P4P and allied organizations are confused, and I consider them to be fake consumer groups. Here are two reasons why.

One, it was a price competitive selection process, not an environmental or ecological selection process.

Two, average electricity consumers like me have two basic needs or demands — that there be enough electricity to avoid blackouts and that this be had at a competitive price. We want to save our gadgets and appliances from damage due to power fluctuations, save the food in our refrigerators, save our eyes from darkness, save our bodies from the inconvenience of not having an electric fan or aircon, save our house and office from potential fires due to the prolonged use of candles, and save our jobs via cheaper electricity running 24/7.

The idea that we have to save the planet is far out because planet Earth has been around for some 4.6 billion years and it had undergone endless natural warming-cooling cycles, El Niño-La Niña cycles, wet-dry season cycles, winter-spring-summer-fall cycles, water evaporation-condensation cycles, and so on.

Our planet never needed a savior, yesterday, today, or tomorrow. Besides, people have option to go off-grid if they want to and use only wind-solar-biomass. There is no need to impose such a lifestyle on everyone else by demonizing coal power and forcing the use of intermittent energy.

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Macroecon 30, PH low unemployment, high GDP growth

Yesterday the PH Statistics Authority (PSA) released the June 2024 labor force data, unemployment rate only 3.1%, wow. It's all-time low since the 80s.