MANILA, Philippines - The government’s debt in proportion to the size of the economy continued to improve as a result of more efficient spending.
As of March 2014, government debt stood at P4.49 trillion or 38.1 percent of gross domestic product (GDP). The current ratio is lower than the 38.5 percent recorded in the first quarter last year due to government’s proactive liability management and slower debt accumulation from April to December 2013.
The debt to GDP ratio is a measure used by many debt watchers to assess the creditworthiness of governments.
Under the consolidated general government debt, the obligations of the Philippine government, the Central Bank Board of Liquidators, social security institutions (SSIs) and local government units are taken into account.
The consolidated debt nets out public holdings of government securities including those held by the Bureau of Treasury’s bond sinking fund (BSF).
The combined investment in government securities of the pension funds Government Service Insurance System and the Social Security System increased to P481 billion as of the end of March from P474.6 billion a year ago.
National Treasurer Rosalia De Leon expects this continuing trend of decreasing debt to go on as the government keeps tights control over expenses and implements more reforms aimed at boosting revenues.
“We will continue to bring down government debt as part of our efforts to minimize government risk and liabilities. As our economy continues to grow, we want to ensure that we do so on sound and strong fiscal foundations,” De Leon said.
The foreign component of the consolidated debt likewise declined from 43.39 percent to 42.06 percent during the period under review amid government efforts to reduce exposure to foreign currency risk. As a result, the domestic component rose slightly to 57.94 percent from 56.61 percent.
From a peak of 78.1 percent during the Asian financial crisis in 1997, the country has steadily pared down its debt relative to the size of the economy.
The Department of Finance said the country’s improving debt position ensures sustained fiscal space throughout the medium term.