Debt-to-GDP ratio continues to fall

MANILA, Philippines - The ratio of the country’s debt to gross domestic product (GDP) continued to fall in the first half largely due to the government’s proactive liability management program.

A lower debt-to-GDP ratio means the country’s economy is growing faster than its debt, and that the budget deficit is being contained.

The debt-to-GDP ratio, a measure used by debt watchers to assess the creditworthiness of governments, stood at 49.5 percent as of end-June, lower than the 51.5 percent registered at the end of 2012.

Given the government’s improving fiscal position, finance officials are confident the government will meet its goal to trim the debt-GDP ratio to 48 percent by yearend.

The government’s outstanding debt reached P5.451 trillion as of June, nearly seven percent higher than the P5.101 trillion recorded in the same period last year as the state ramped up domestic borrowings.

The aggregate debt takes into account the obligations of the government, the Central Bank Bord of Liquidators, social security institutions and local government units.

Of the total government debt, P3.5 trillion or 64.2 percent came from domestic lenders while P1.95 trillion was sourced overseas for a 64 to 36 distribution of external and domestic debt.

Local debt increased by 14.8 percent to P3.502 trillion mainly due to the government having issued more treasury bills and bonds compared to the volume that was repaid.

Foreign borrowings, mostly in the form of loans from development lending institutions, meanwhile decreased by 4.9 percent to P1.903 trillion. This was in line with the government’s strategy of relying more on local sources of credit amid low interest rates and the strong liquidity of the country’s financial system.

Total government-guaranteed debt went up to P491 billion, up by P11 billion or 2.5 percent month on month. The depreciation of the peso as well as third currency appreciation against the US dollar expanded the peso value of debt by P10 billion and P4 billion, respectively.

External guaranteed debt dropped by P2 billion due to net repayments while domestic guaranteed debt remained unchanged for the period.

Government debt paper pegged in dollars amounted to an equivalent of P1.02 trillion while yen and euro loans stood at P42 billion and P28 billion, respectively.