Debt-to-GDP ratio stands at 37% as of September 2019

MANILA, Philippines — The share of government   debt to gross domestic product (GDP) slipped to 37.2 percent as of end-September last year from the end-June level of 37.6 percent, according to the Department of Finance (DOF).

Data released by the finance department  over the weekend showed general government debt-to-GDP ratio for the third quarter last year was higher than the 36.3 percent recorded as of end-September of 2018.

General government debt includes the outstanding debt of the national government, social security institutions (SSIs), the Central Bank Board of Liquidators (CB-BOL) and local government units (LGUs), minus intra-sector debt holdings of government securities, including those held by the bond sinking fund (BSF).

Debt-to-GDP ratio is an indicator used by debt watchers and credit rating agencies to assess a country’s debt sustainability. A lower ratio indicates the government is generating more resources than debts, giving it more payment capacity.

General government debt, the DOF reported, amounted to P6.79 trillion and was almost unchanged from the end-June level of P6.77 trillion, but was 10.4 percent higher than the P6.15 trillion recorded in end-September of 2018.

Of the total, 62 percent or P4.21 trillion came from domestic borrowings and the remaining 38 percent or P2.58 trillion were from external loans.

The national government debt net of the bond sinking fund (BSF) amounted to P7.32 trillion, posting a slight increase of 0.2 percent from the second quarter level of P7.31 trillion and an increase of 9.9 percent from the same quarter level of P6.66 trillion in 2018.

Domestic debt declined by 1.3 percent to P4.73 trillion, while external debt went up by three percent to P2.58 trillion.

Local government debt increased by 2.3 percent or P105.20 billion compared to the second quarter level of P102.80 billion and 17.3 percent higher than the P89.7 billion recorded in the same period in 2018.

Meanwhile, SSIs such as the Government Service Insurance System (GSIS) and the Social Security System (SSS) did not contribute to the debt stock, but simultaneously decreased their intra-sector holdings of government securities by 0.3 percent compared with the second quarter of 2019.

The government borrows from both domestic and external lenders to plug the expected budget deficit as the country continues to spend more than what it raises through tax collections.

Finance Secretary Carlos Dominguez earlier raised the country’s budget deficit ceiling to 5.3 percent of gross domestic product (GDP) from the original target of 3.2 percent this year to meet the unexpected challenges to the Filipino people and the domestic economy amid the  coronavirus disease 2019 or COVID-19 outbreak.