Finance Secretary Cesar Purisima: Public sector debt has become more and more manageable. INQUIRER FILE PHOTO
MANILA, Philippines—The country’s public sector debt as a proportion of its gross domestic product declined further in the third quarter of 2013, supporting views that the credit worthiness of the Philippines has improved over the past few years.
The combined outstanding liabilities of the government, local government units and state-owned firms reached P4.468 trillion as of the end of September last year, equivalent to 39.7 percent of the GDP, the Department of Finance reported on Wednesday.
The amount excludes “intrasector debt holdings,” or debt of government entities incurred through loans obtained from, or through sale of bonds to, other government agencies.
The latest debt-to-GDP ratio marked an improvement from 40.3 percent in the same period in 2012.
Finance Secretary Cesar Purisima, in a statement, noted that public sector debt had become more and more manageable since the start of the Aquino administration.
In 2009, Purisima said, public sector debt as a proportion of GDP stood at 44.3 percent.
“By reducing government debt, we are attempting to ensure the sustainability of our recent economic resurgence,” he said.
With a more manageable debt, he explained, the Philippines would be able to invest more in social services, infrastructure and other initiatives meant to keep the economy growing.
The Philippines has been one of the fastest growing economies in Asia, posting GDP growth of 6.8 percent in 2012 and 7.2 percent last year.
Despite this, the country still has one of the highest poverty rates in the region at 25.2 percent as of 2012.
Economists said the country would have to keep posting 6- to 7-percent growth over the long term for economic growth to translate into a significant drop in poverty incidence.
Purisima said that with the declining debt burden of the country, investing more in initiatives that would sustain a robust economic growth was feasible.
He credited liability management strategies adopted by the Aquino administration for the decline in the debt-to-GDP ratio. These include the policy of borrowing more from domestic sources than from foreign creditors and the bond exchange initiatives.
The bias in favor of domestic borrowings keeps the government’s exposure to foreign-exchange risks modest, Purisima said.
Bond swaps, through which the Bureau of the Treasury exchanges maturing bonds with freshly issued ones, help extend the average maturity of the government’s debt.