PHL debt-to-GDP ratio eases in first quarter

The ratio of national government debt to the economy dipped in the first quarter on sustained liability management amid brisk growth. 

 

In a statement Friday, the Department of Finance (DOF) reported the national government (NG) debt eased to 48.9 percent of gross domestic product (GDP) in the first quarter of 2013, down from 51.5 percent at the end of 2012. 

 

Debt-to-GDP ratio gauges the sustainability of state liabilities, with a lower ratio indicating that the country has more than enough resources to settle its debts. 

 

The Aquino administration wants the ratio to settle at 48.4 percent in 2013.

 

“The government remains committed to its proactive liability management agenda,” Finance chief Cesar Purisima said in the statement. “The improvement in our debt statistics is the result of our policy of structural fiscal sustainability.” 

 

The economy grew by a stunning 7.8 percent in the first quarter, surpassing market expectations. 

 

The foreign component of NG debt dropped to 17.4 percent of GDP as of end-March 2013 from 18.6 percent as of end-December 2012. 

 

In March, Purisima bared government plans to further decrease borrowing from foreign creditors this year in line with efforts to reduce exposure to foreign currency risk. 

 

In a briefing earlier this month, the Finance chief also noted that the government eyes pre-paying development assistance loans from multilateral lenders. 

 

Sustained efforts to manage liability has decreased General Government (GG) debt ratio at 40.6 percent in 2012—from 41.4 percent in 2011—the lowest since the metric was adopted in 1998, according to the Finance Department. 

 

“The GG debt ratio’s descent is driven by the NG purchasing more of its own debt as part of its proactive liability management agenda,” the statement read,  referring to the tender-offer transaction in November 2012 in which the government bought back P22.3 billion of expensive foreign currency debt using the Bond Sinking Fund (BSF). 

 

The foreign component of the consolidated GG debt also went down to 44.1 percent  in 2012 from 50.2 percent in 2011. “Also contributing to the ratio’s decline are the retirement of the remaining obligations of the old Central Bank and the increased holdings of government debt by the Social Security Institutions (SSIs),” the statement read. 

 

The Central Bank Board of Liquidators (CB-BOL) paid in full the last of its foreign obligations in January 2012. 

 

Intra-sector debt holdings by SSIs rose from P409.6 billion to P453.7 billion from 2011 to 2012.

 

Consolidated GG debt includes outstanding debt of the NG, the CB-BOL, SSIs, and local government units, and nets out intra-sector holdings of government securities including those held by the BSF. It is the debt measure used by many debt watchers to assess the creditworthiness of sovereigns.  — Siegfrid O. Alegado/VS, GMA News