Gov't debt hits 2015 goal, drops to record-low level

MANILA, Philippines - The government hit its target for the second broadest measure of public debt last year, bringing down the figure to its lowest level on comparable record, the Department of Finance (DOF) reported on Friday.

General government debt accounted for 36.3 percent of economic output last year, matching official goals. It also marked the lowest level since 51.1 percent in 1998, the earliest data when same methodology was used for computation.

In absolute values, liabilities totaled P4.83 trillion last year, up 4.12 percent from previous year.

The gauge includes obligations of the national government, local government units, pension funds such as the Social Security System, and central bank Board of Liquidators. It does not cover debts incurred by state corporations. 

It is a closely watched measure of the country's capacity to meet its liabilities. When compared to gross domestic product, it shows if the economy is creating resources faster than debt.

"Instilling fiscal sustainability in government operations ensures predictability in a volatile world looking for stability," Finance Secretary Cesar Purisima said in a statement.

"We can keep our healthy fiscal position for so long as good governance remains top of mind in the public sector," he added.

In absolute figures, general debts rose after national and local governments rose 3.8 and 4.2 percent, respectively. Those of other covered entities were flat from last year.

Sought for comment, Jeff Ng, economist at Standard Chartered, referred to his bank's special report last March where he said the Philippines had "room for further leverage."

"The Aquino administration has focused on reducing government's reliance on debt, and we expect the next administration to continue to work on improving government debt metrics," economists including Ng said in the report.

On his eight-point economic agenda, incoming president Rodrigo Duterte vowed to "continue and maintain" Aquino's macroeconomic policies.

For his part, Nicholas Antonio Mapa of the Bank of the Philippine Islands said it is not always good news to see the debt burden down.

"There are two sides to improving debt ratios. Sure, we have had better (revenue) collection..., but we also have seen better debt ratios because our spending has been absolutely dismal," he said in an earlier e-mail.

"Our (Southeast Asian) neighbors are scrambling to spend huge amounts of money to improve infrastructure and we have, well, we know what happened," he added.

Citing data from the Organization of Economic and Development Cooperation, DOF said Philippines' debt ratio was better than Malaysia with 52.7 percent, Brazil (57.2 percent), India (67.1 percent), Germany (82.2 percent) and even the US (123.3 percent).

For the past six years, the Philippines scored 24 positive credit rating actions from global credit raters, which in turn resulted into lower interest in our obligations and smaller debt payments.

"Debt watchers do take into account debt ratios, but I do believe... the improvement could be tied more to lack of spending," Mapa said.