Debt-to-GDP ratio improved in September 2016

February 2, 2017

The debt of the general government reached P5-trillion as of end-September 2016 as the GG debt-to-GDP (Gross Domestic Product) ratio improved to 35.5 percent compared to the 36.7 percent in the same period last 2015, according to the Department of Finance (DOF).

In a statement, Finance Undersecretary and Chief Economist Gil Beltran said nominal general government debt was P5.022 trillion as of September 2016, a 4.2 percent increase from the previous year’s level of P4.819 trillion.

“Domestic borrowings accounted for more than half of the total GG Debt at P2.909 trillion, while the remaining P2.113 trillion were sourced from external lenders,” said Beltran.

General government debt covers the outstanding obligations of the National Government (NG), the Central Bank Board of Liquidators  social security institutions and the local government units , minus the intra-sector debt holdings of government securities including those held by the Bond Sinking Fund (BSF).

Citing DOF data, Beltran said the rise in the nominal general government debt was mainly due to the 2.5 percent increase in the outstanding national government debt to P6.087 trillion from the end-September 2015 level of P5.936 trillion.

“National Government debt net of the Bond Sinking Fond holdings meanwhile reached P5.447 trillion, 3.9 percent higher than the P5.242 trillion during the same period in 2015 as a combined result of peso depreciation (P1.53 year-on-year) and lower BSF holdings,” he said.

Beltran said local government unit debt grew by 11.4 percent to P77.3 billion as of September compared to the prior year’s level of P69.4 billion.

“The increase in borrowings are to be used for procurement, financing public services as well as economic enterprises,” he said.

Beltran bared that intrasector debt holdings was at P503.1 billion as of end-September 2016, up by 2.0 percent compared to the previous year’s level of P493.0 billion, as “social security institutions increased their holdings of Government Securities by P10.1 billion.”

“Despite the rise in nominal debt, the GG debt-to-GDP ratio has gone down to 35.5 percent from 36.7 percent in Q3 2015 due to the sustained improvement in the economy,” he said.

Beltran said “the debt ratio is a valuable indicator used by debt watchers and credit rating agencies such as Fitch, Moody’s and S&P to assess debt sustainability which is a factor in evaluating the creditworthiness of countries.” DMS