Gov’t debt seen to exceed P6T

The government’s debt stock is expected to exceed P6 trillion in 2014.

Based on the projections of the Department of Finance, collection of taxes and other revenues would remain short of the government’s expenditure requirements, which meant continued reliance on borrowings.

The estimated borrowing requirements next year would push the government’s outstanding debt to P6.23 trillion, up by about 7 percent from the projected P5.8 trillion debt by the end of this year.

Revenue collections next year are expected to fall short by P266.2 billion of the government’s expenditure requirements. This is higher than the P238 billion budget deficit ceiling set for this year.

Also, the government will have to borrow more next year given the obligations that are falling due during the year.

The government sets aside a portion of its annual budget for interest payments on its loans. It, however, relies on fresh borrowings to pay maturing principal debts.

The Department of Finance, however, said that although outstanding debt would rise further, its proportion to the size of the economy was expected to continue to shrink. It said the rise in the government’s debt stock was expected to be outpaced by the growth of the economy.

According to projections, which were submitted to Congress as supporting information for the proposed 2014 national budget, the proportion of the debt stock next year to the country’s gross domestic product (GDP) will be 46.8 percent.

The government has gone a long way in improving the manageability of its debts in terms of their proportion to GDP.

The debt-to-GDP ratio peaked at more than 70 percent in 2004. The ratio has steadily declined hitting 51.5 percent last year.

The ratio is expected to fall below the 50 percent for the first time this year at 48.7 percent.

Based on international standards, a debt-to-GDP ratio of 50 percent or lower is considered manageable.

The DOF said the country’s declining debt-to-GDP ratio was one of the indicators of its improving fiscal situation.

The department credits the improving manageability of the government’s debts as among the factors behind the investment grades received by the Philippines.

In March, Fitch Ratings upgraded its credit score for the Philippines by a notch from BB+ to the minimum investment grade of BBB-.  Standard & Poor’s did the same in May.

Moody’s Investors Service has placed the country’s credit rating in review for potential upgrade. Moody’s currently rates the Philippines a notch below investment grade.