Growth of economy outstrips rise in gov’t debt

The outstanding debt of the government rose anew in September as it continued to rely on borrowings to help meet its expenditure requirements.

But the Department of Finance said that, despite the rising obligations, the government has improved the management of the debt stock because the increase was slower than the expansion of the economy.

The Bureau of the Treasury (BTr), a unit of the DOF, reported that the debt stock amounted to P5.61 trillion as of the end of September—up by 7.6 percent year on year.

If it were to be divided among the country’s 97.6 million people, each would have a share of nearly P58,000.

Of the outstanding liabilities, the bigger share of P3.68 trillion was accounted for by debt incurred from the domestic market. This marked a year-on-year increase of 15.5 percent.

Domestic borrowings are done mainly through the sale of treasury bills and bonds during the BTr’s weekly auctions.

Foreign borrowings accounted for the balance of P1.93 trillion, which was 4.7 percent lower year on year.

Foreign borrowings are composed mainly of loans secured from development lenders—including the Japan International Cooperation Agency, World Bank and Asian Development Bank—and proceeds from the sale of sovereign bonds abroad.

The government has adopted the policy of borrowing more from domestic sources to avoid excessive exposure to foreign exchange risks.

Also, the DOF said the proportion of the government’s outstanding debt to the size of the economy—measured in terms of gross domestic product, or GDP—could fall further this year to below the threshold of 50 percent.

For the first time, the annual debt-to-GDP ratio this year would settle below 50 percent.

Falling consistently year after year since 2004, when the debt-to-GDP ratio stood at 78 percent, the proportion stood at 51 percent in 2012.

The decline in the “debt burden” was credited for helping the Philippines secure its first investment grade from major international credit agencies this year.

Fitch Ratings raised the country’s credit score by a notch to the minimum investment grade of BB- in March.

Standard & Poor’s and Moody’s Investors Service did the same in May and October, respectively.

The three major ratings watchdogs said that, apart from the falling debt-to-GDP ratio, other factors that led to the credit upgrade were the country’s robust economic growth, benign inflation, rising dollar reserves, and stability of the local banking system.

“We will continue to maintain fiscal discipline,” Finance Secretary Cesar Purisima earlier told reporters.

The finance chief said the DOF has tasked the Bureau of Internal Revenue to continue shoring up tax collection so that the government can deal with rising expenditure requirements while it keeps the debt burden from rising.

The BIR last year hit the P1-trillion tax collection mark for the first time in its history. The BIR is tasked to collect P1.253 trillion this year. It hopes to hit the P2-trillion mark by 2015.

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