Public debt down 1.6% to P7.3 T in Q3

MANILA, Philippines – The broadest measure of public sector debt decreased as of the third quarter of last year, pulled down by bigger deposits and lower liabilities incurred by state corporations.

The outstanding public sector debt hit P7.307 trillion as of September, down 1.60 percent from P7.426 trillion in the same period a year ago, the Department of Finance (DOF) reported yesterday.

“This is mainly due to higher national government/GOCC deposits with government financial institutions and the corresponding increase in GFI deposits with the BSP,” the agency said.

“In addition, there was a drop in the outstanding obligations of the 14 monitored GOCCs,” it added.

Outstanding public sector debt includes obligations by the National government, local government units, social security institutions, the Bangko Sentral ng Pilipinas (BSP) Board of Liquidators, government-owned and -controlled corporations (GOCCs) and financial and non-financial institutions (GFIs).

As a proportion of economic output, the total debt pile was equivalent to 55.8 percent, also down from 60.3 percent in the previous year.

The latest debt-to-gross domestic product (GDP) ratio, the DOF said, was also the lowest in record dating back to 1998.

Debt-to-GDP ratio is a widely used indicator to gauge a country’s capacity to settle its obligations on time. It indicates how debt compares with total resources in an economy.

While there is no ideal measure, governments usually try to lower the ratio to at most 50 percent, which they deem sustainable.

Sought for comment, Nicholas Antonio Mapa, research officer and economist at the Bank of the Philippine Islands, had mixed reactions to the latest report.

While it is good that debt levels have gone down, Mapa said the government should not to this at the expense of financing economic growth.

“At times of financial volatility and global uncertainty, I think it is best for the government to lay out some counter-cyclical stimulus measures,” he said in a phone interview.

“We very well need it especially in some sectors like infrastructure,” he added.

The government and its agencies borrow from local and foreign investors to bridge their budget deficits or pay existing debts.

As of September last year, outstanding public borrowings declined due to lower debts from the Power Sector Assets and Liabilities Management Corp.

This, in turn, contributed primarily to the P81.4-billion decrease in non-financial state firms’ liabilities.

More funds were also funneled into GOCCs and GFIs to support their operations, the DOF said.

“We will continue to closely monitor GOCC debt to ensure they remain healthy and resilient from external volatility,” Finance Secretary Cesar Purisima was quoted as saying in the statement.