Q1 debt ratio sustains declining trend

Bening Batuigas - Philstar.com
MANILA, Philippines — The national government's debt burden continued its declining trend in the first quarter and hit its lowest quarterly level since at least 2004, data from the Department of Finance showed.
Liabilities accounted for 43.57 percent of gross domestic product (GDP) in the first three months of the year.
This was down from 44.7 percent by the end-2015 and 45.3 percent in the third quarter of that year. It was way lower than the 74.2 percent in the same period in 2004, the earliest data available.
The so-called debt-to-GDP ratio reflects how much obligations the government is incurring vis-a-vis the sum of products and services created in an economy.
It is a closely watched measure by the country's lenders as it shows if the economy is generating enough resources to settle its liabilities. The target for the year is below 45 percent.
"The declining debt-to-GDP ratio shows that the government's fiscal consolidation efforts in the past decade or so have borne fruit," said Remrick Patagan, research director at Institute for Development and Econometric Analysis Inc.
"Limiting the deficit and the accumulation of debt has coincided with monetary and credit conditions conducive to better debt management," he said in an e-mail.
The government borrows locally and offshore to finance its budget deficit or pay existing debts.
From January to March, the budget gap widened to P112.49 billion, but before this, the Aquino administration has underspent much during the last five years and consistently fell below its deficit cap.
This, in turn, has allowed the government to pay or replace existing expensive and short-term debts on its balance sheet at a time of low interest rate and funds are cheap.
As of March, the debt pile has weighted average interest rate of 5.11 percent, down from 5.53 percent by end-2013, Bureau of the Treasury data showed. 
But Nicholas Antonio Mapa, economist at Bank of the Philippine Islands, was not impressed.
"The declining debt to GDP...came at the cost of underspending and lack of investment in infrastructure, which may hurt us by limiting our potential," Mapa said in a separate e-mail.
"Poor infrastructure was staring them in the face and yet inability to spend...led to only marginal improvements in our transport networks," he added.
Patagan said it remains to be seen if the incoming Duterte administration will continue the outgoing's liability management program, "though they have signaled they would like to maintain" current policies.
Mapa, for his part, encouraged the next government to improve the country's fiscal standing without sacrificing spending for its needs.
"That's been one criticism against Aquino. Fiscal ratios improved but mainly because spending was not vigorous as needed," he said.

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