Debt-to-GDP ratio eases to 39.2% in ’13

MANILA, Philippines - The ratio of government debt to gross domestic product eased further to 39.2 percent last year from 40.6 percent in 2012.

In a report, the Department of Finance said the government’s debt to GDP declined to P4.53 billion as of the end of December 2013.

Government debt to GDP, which peaked at 78.1 percent during the Asian financial crisis in 1997, has been on a downward trend in the past few years as the Aquino administration stepped up efforts to manage the country’s debt.

Generally, government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting its borrowing costs and government bond yields.

This continuing trend of decreasing general government debt-to-GDP ratio shows government’s efforts to ensure sustained fiscal space throughout the medium term.

The decrease in government debt level was attributed to the ongoing fiscal consolidation with deficit accounting for only 1.3 percent of the country’s total economic output.

Apart from this, the government took advantage of broadly favorable domestic funding conditions in 2013 to redenominate away from foreign currency debt.

Of the P554.7-billion gross borrowing for the year, 94 percent came from the domestic market while the remaining six-percent comprised concessional foreign loans from development partners.

This helped reduce the foreign debt component of government debt to only P1.95 trillion or 34.3 percent of the total outstanding debt.

A decrease of local government debt to P71 billion from P73.4 billion likewise helped trim the ratio.

The intra-sector debt holdings of local government also declined to P3 billion from P3.1 billion.

Under the consolidated general government debt, the obligations of the Philippine government, the Central Bank Board of Liquidators, social security institutions (SSIs) and local government units are taken into account.

The consolidated debt also nets out public holdings of government securities, including the Bureau of the Treasury’s bond sinking fund (BSF).

The combined investment in government securities of the GSIS and the SSS, meanwhile, rose to P474.6 billion from P453.7 billion in 2012.