Gov’t debt up but share to GDP down in ’15

The share of government debt to the gross domestic product (GDP) slid further in 2015, as economic expansion outpaced the moderate increase in obligations.

Citing Bureau of the Treasury data, the Department of Finance (DOF) yesterday said the debt-to-GDP ratio went down to 44.8 percent last year from 45.4 percent in 2014.

“The improvement in the debt-to-GDP ratio, a measure of sustainability, can be attributed to the sustained accelerated pace of economic growth in tandem with disciplined fiscal spending that moderated borrowing requirements for the year,” the DOF said.

“The Philippines is fully committed to a proactive liability management strategy to keep our debt structure resilient. I am optimistic we can further trim down our debt-to-GDP ratio, which from 52.4 percent in 2010 has narrowed to 44.8 percent in 2015, a 7.6-percentage point difference,” Finance Secretary Cesar V. Purisima said in a statement.

The latest Treasury data showed that the national government’s outstanding debt rose 3.8 percent to P5.955 trillion at end-2015 from P5.735 trillion in 2014. Month-on-month, the outstanding liabilities at end-December inched up by 0.03 percent from P5.953 trillion in November.

Domestic debt still accounted for the bulk of the end-2015 liabilities at P3.884 trillion, up 1.7 percent from P3.821 trillion a year ago, but lower by 0.3 percent than the P3.896 trillion posted a month ago.

The Treasury attributed the slight month-on-month drop in the national government’s outstanding domestic debt to “net redemption of government securities amounting to P11.35 billion offsetting the [about] P20 million upward adjustment in peso value of foreign currency domestic liabilities due to peso depreciation.”

The peso weakened to an average of 47.15:$1 in December from 47.1:$1 last November.

As for external debt, the end-2015 amount rose at a faster 8.1 percent to P2.07 trillion from P1.915 trillion in 2014. The DOF nonetheless noted that the share of foreign obligations to the economy dropped to 15.6 percent of GDP last year compared with 22.2 percent in 2010.

Compared to months-ago level, the end-December external debt went up 0.6 percent from November’s P2.057 trillion “due to the combined effect of net availments worth P3.81 billion and peso depreciation as dollar- and third currency-denominated debt gained P2.18 billion and P7.26 billion in local currency valuation, respectively,” the Treasury said.

“A challenging external environment calls for consistent discipline in making sure productive debt works in our favor. We will continue to stretch average maturities reasonably (now at 10 years) and keep a healthy preference for domestic financing (now at 67 percent),” Purisima said.

The government plans to borrow P674.8 billion this year, lower than last year’s program of P710.8 billion, to slash the debt stock or the share of outstanding debt to the GDP to a record-low of 41.8 percent.

Domestic borrowing would account for 85 percent of the total or P570.2 billion. The government would also borrow P104.6 billion from foreign sources—P54.1 billion in program loans, P17.1 billion in project loans, and P33.4 billion in bonds and other inflows.

The government, however, has delayed the foreign bond sale it usually undertakes early in the year due to volatility in the global markets, National Treasurer Roberto B. Tan last month.

The guaranteed debt of the national government, meanwhile, grew 2.7 percent year-on-year to P437.9 billion as of the end of 2015, even as the end-December figure was 0.5-percent lower than a month ago “due to net repayment on guarantees amounting to P5.29 billion,” which the Treasury said “reversed the effect of currency fluctuation that raised the peso value of guarantees by P2.91 billion.”

In 2015, guaranteed domestic obligations jumped by 17.2 percent year-on-year to P138.4 billion, while external liabilities dropped by 2.8 percent to P299.5 billion.