MANILA, Philippines—The government spent P622 billion in the first 10 months of the year to pay debts, as part of the administration’s commitment to improve the country’s credit profile and secure an investment rating for the Philippines.
Data from the Bureau of the Treasury said the debt payment as of October was P2 billion more than the P619.86 billion spent in the same period last year.
Of the debt payment as of October, P355.36 billion was used to pay principal obligations while interest payments accounted for the rest.
Finance officials said the regular payment of obligations and other debt-management strategies, combined with efforts to shore up tax collection, have allowed the government to significantly trim its debt burden to a comfortable level.
The government’s outstanding debt of P5.2 trillion as of the end of September is equivalent to about 50 percent of the country’s gross domestic product.
The debt-to-GDP ratio, a closely watched indicator of creditworthiness, has been brought down over the years from a peak of 74 percent in 2004, when the Philippines was said to be on a brink of a fiscal crisis.
According to international standards, a debt-to-GDP ratio of a maximum of 50 percent is “manageable.”
Finance officials expect the ratio to fall below 50 percent next year, citing rising revenue collection and debt-management strategies.
Following several positive ratings actions for the country over the past two years, the Philippines is now rated just a notch below investment grade by all three major international ratings agencies, namely Fitch Ratings, Moody’s Investors Service and Standard & Poor’s.
Citing robust economic growth and the declining debt burden, officials said the Philippines was poised to get an investment rating by 2013.
In the third quarter, the Philippines economy grew by 7.1 percent year on year, the fastest in Southeast Asia during the period.
An investment grade is expected to help attract substantially higher amounts of foreign direct investments (FDIs) and thus help the Philippines catch up with its neighbors as far as cornering job-generating FDIs is concerned.
Currently, the Philippines lags behind most of its Southeast Asian neighbors when it comes to FDIs.