The outstanding debt of the government rose further in October as the state continued to take out loans to support its expenditures.
The Bureau of the Treasury on Wednesday reported that the government’s outstanding debt reached P5.65 trillion as of the end of October—up by 5.4 percent year on year.
But finance officials said the increase in the debt stock remained manageable as the rate of rise was slower than the growth of the economy.
In nominal terms, the economy was estimated to have grown by at least 9 percent in 2013.
Based on the projections of the Department of Finance, the government’s debt stock as a proportion of the economy’s gross domestic product dropped to about 49 percent last year—the first time the debt-to-GDP ratio fell below 50 percent.
Based on international standards, a debt-to-GDP ratio of 50 percent or below is considered comfortable.
Treasury data showed that, of the government’s latest debt stock, the bigger share of P3.73 trillion was secured domestically. This was up by 10.5 percent year on year.
Domestic borrowings are done mainly through the sale of treasury bills and bonds.
The government also borrowed P1.92 trillion from the international capital market—3.3 percent lower year on year.
The government has adopted a policy of borrowing more from the domestic rather than the foreign market to avoid substantial exposure to foreign exchange risk.
Officials also said that, by borrowing more from local creditors, the government helped temper the sharp appreciation of the peso.
The outstanding foreign borrowings are composed of liabilities incurred from sale of bonds in the international market in the previous years, as well as loans obtained from development institutions.
The country’s biggest providers of official development assistance, or loans that are much cheaper than commercial ones, are Japan International Cooperation Agency, Asian Development Bank and World Bank.
Proceeds of loans are used to pay off the government’s maturing obligations.
Also, the proceeds of foreign and domestic borrowings are used to fund the government’s expenditure requirements, such as infrastructure projects and other development initiatives.
The government expected its expenditures last year to exceed its revenue collection by P238 billion or less.
Also, the Treasury reported that the government’s outstanding contingent liabilities amounted to P484.04 billion as of the end of October—down by 8.4 percent year on year.
Contingent debts are obligations of state-owned firms that are guaranteed by the government. The government assumes these obligations in the event of a default.