Government debt to swell to 46.7% of GDP — BTr

MANILA, Philippines — The Bureau of the Treasury (BTr) expects government debt to swell to 46.7 percent of gross domestic product (GDP) by the end of 2020 as the country ramps up its borrowings for coronavirus response efforts.

The projected general government debt-to-GDP ratio is higher than the 34.1 percent recorded in 2019, but National Treasurer Rosalia de Leon said the figure remains manageable as it falls within the median among the country’s peers.

“We will be in the middle of the pack, against other countries like the ASEAN. Thailand would be 49.5 percent, Malaysia would be 65.5 percent. Mexico would be 65.9 percent,” De Leon said during a Senate Committee on Finance hearing on the proposed 2021 budget.

The government raised its borrowings to plug the deficit in its budget, which is now expected to widen to 9.6 percent of GDP due to the pandemic.

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

According to the Department of Finance, the outstanding general government debt as of end-December 2019 amounted to P6.65 trillion, up by 5.9 percent from the end-2018 level of P6.28 trillion.

On the other hand, the national government’s outstanding debt also reached a record-high of P9.16 trillion as of end-July.

The BTr estimates that the national government’s debt may settle at 53.9 percent of GDP this year, before rising further to 58.1 percent in 2021 and 59.9 percent in 2022.

Finance Undersecretary Bayani Agabin said these figures are still below the all-time high debt level of 71.6 percent in 2004.

“At 60 percent, it’s still manageable and it’s still responsible borrowing,” he said.

Meanwhile, de Leon also cited the government’s absorptive capacity as another metric for the country’s fiscal sustainability as shown by interest payments as a percentage of revenue and spending.

De Leon said interest payments reached 11.5 percent of revenues and 9.5 percent of expenditures in 2019, much lower than the 30 percent level back in the ‘80’s.

The BTr’s latest cash operations report also showed that the interest payment-to-revenue ratio stood at 14.64 percent in the first seven months , while interest payments-to-expenditures reached 10.34 percent.

“We can still channel a lot of our revenues and a share of our expenditures for productive spending, like infrastructure and social services,” de Leon said.