DOF: 'Build, Build, Build' will outrun growth of debt
As it plans to ramp up spending, particularly on infrastructure, the national government is programmed to borrow P889.51 billion in 2018 from local and foreign lenders. File
MANILA, Philippines — The Department of Finance on Wednesday assured the public that although the Duterte administration’s ambitious infrastructure program might stoke an increase in government debt, robust economic expansion brought by better infrastructure would “outrun the growth of debt.”
“In the short-term, the government's Build, Build, Build Program may exert upward pressure on the debt stock. In the medium- to long-term, however, a sustainable high economic growth rate will outrun the growth of debt,” the DOF said in an economic bulletin.
The Bureau of Treasury recently reported that national government debt ended 2017 at a record P6.652 trillion, up 9.2 percent from a year earlier, though debt as a proportion of the country’s gross domestic product remained steady.
The DOF said the 9.2 percent surge in debt stock was due to increase in domestic debt following the issuance of retail treasury bonds in the last quarter of 2017.
“From a high of nearly 75 percent in 2004, debt-GDP ratio was drastically reduced to below 45 percent, owing to prudent debt management, fiscal discipline, and economic growth,” the DOF said.
“The economy has been outgrowing debt in the past years, meaning, the country's capacity to service its debt has been improving,” it added.
As it plans to ramp up spending, particularly on infrastructure, the national government is programmed to borrow P889.51 billion in 2018 from local and foreign lenders.
Of the amount, 26 percent will come from foreign creditors, while the remaining 74 percent will be borrowed domestically.
The Duterte administration has set an P8.44-trillion infrastructure spending plan until 2022 to spur gross domestic product growth to 7-8 percent starting this year from a targeted 6.5-7.5 percent in 2017.
The Development Budget Coordination Committee projects a 90 percent probability that the debt-to-GDP ratio will settle below 43.9 percent by 2022, and a 50 percent likelihood it will stay between 36-41.4 percent.
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