Benjamin Diokno
The government’s debt, as a share of the economy, remains at a level that is “not scary” and is unlikely to affect the country’s growth outlook, Finance Secretary Benjamin Diokno said.
At an economic briefing in the United States, Diokno said he expects the country’s debt-to-gross domestic product (GDP) ratio to continue to go down.
“I don’t think it has a significant impact on macroeconomic outlook because as I said, the debt-to-GDP ratio at the moment is at 61 percent and going down,” the finance chief said.
“And that is not really scary compared to other countries,” he added.
Data show the debt-to-GDP ratio, a closely watched indicator of the government’s ability to settle its obligations, improved to 60.2 percent in the third quarter, from 61.0 percent in the second quarter.
Manageable levels
Economists believe that debt would stay at manageable levels as long as the economy grows faster than state liabilities. The idea is that a healthy economic expansion means more revenues would be generated by the government to pay for its borrowings.
Despite the improvement, the debt-to-GDP ratio in the third quarter remained above the 60-percent threshold deemed manageable for emerging economies like the Philippines.
But the good news is the figure is now ahead of the government’s target of bringing the ratio down to 61.4 percent this year. At the same time, the Treasury said the ratio was on track to fall below 60 percent before 2025, or earlier than expected.
According to Diokno, local borrowings continue to account for the majority of the total debt pile to minimize foreign exchange risks. Data show outstanding state liabilities amounted to P14.27 trillion as of September, 68.2 percent of which is domestic debts.
The finance chief also said a large chunk of the debt load has long repayment periods. Figures from the Treasury showed 78.9 percent or P11.26 trillion of the total debt burden as of September has long payment terms based on original maturity. INQ