The Department of Finance said over the weekend it expects the country’s debt-to-GDP ratio to stabilize as pandemic-related spending winds down.
It said in an economic bulletin the national government debt stock slightly eased to P11.729 trillion in the fourth quarter from P11.917 trillion in the third quarter.
The DOF said the debt metric, in terms of the percentage of the gross domestic product, improved from 63.1 percent in the third quarter to 60.5 percent in the fourth quarter. It said this level was “still sustainable for an emerging economy.”
“The recent build-up of debt was largely in response to pandemic-related expenses. However, the government continues to judiciously manage debt, maintaining a prudent balance between domestic and external sources of financing, with more emphasis on the former to minimize effects of external risks,” the department said.
It said the fiscal consolidation and economic recovery would be very critical in preserving fiscal stability. “The debt-GDP ratio is expected to stabilize as pandemic-related spending is wound down,” it said.
It said that in the light of the Supreme Court ruling on the Mandanas-Garcia case, the devolution of pertinent functions to local government units, as enumerated in the LGU Code of 1991, would help ease the fiscal burden of the national government.
“Note that the medium-term fiscal program shows declining trend in the deficit largely on account of expenditures rising more slowly than GDP but that infrastructure spending is not sacrificed. Furthermore, structural measures, such as reforming the pension system of the military and uniformed personnel will prevent the further build-up of pressure around fiscal fault lines,” it said.
The fiscal impact of the current MUP pension system is about P114 billion annually, according to the 2021 Fiscal Risk Statement.
“Resuming pre-pandemic economic growth rate calls for learning to live with the virus and fast-tracking the recovery. We already have an ongoing infrastructure program and have cut corporate income taxes. Passing the amendments to the Public Service Act and the Foreign Investments Act, together with the recently amended Retail Trade Liberalization Act, will have added a potent ingredient to the economic recovery cocktail that can deliver a big shot in the arm of the Philippine economy,” the DOF said.
Latest data from the Bureau of the Treasury showed that the total outstanding debt of the national government as of end-December 2021 declined by 1.7 percent to P11.729 trillion from the record P11.931 trillion in November, driven by better fiscal performance and lower financing requirements.
The end-December 2021 outstanding debt, however, was higher by 19.7 percent than the P9.795 trillion in December 2020. Its growth rate was slower than the 26.7-percent rise registered in the same period a year ago.
About 30.3 percent of the total debt stock was sourced externally, while 69.7 percent represented domestic borrowings.
“The debt-to-GDP ratio was registered at 60.5 percent, rising from 54.6 percent a year ago but still within the accepted sustainable threshold as the economy continues to recover from the effects of the pandemic,” the Treasury said.
Domestic debt amounted to P8.17 trillion as of end-December, which was P271.09 billion or 3.2 percent lower compared to the end-November 2021 level as the repayment of the P540.00 billion provisional advance from the Bangko Sentral ng Pilipinas outpaced the net issuance of government securities.
The Treasury said on a year-on-year basis, domestic debt grew by P1.48 trillion or 22.0 percent in line with the domestic borrowing program which favors domestic issuance to mitigate foreign exchange risk and support local capital market development.
The external debt of P3.56 trillion as of end-December was P67.81 billion or 1.9 percent higher than in November.
