DOF Economic Bulletin on debt ratios

External debt dropped from 14.9% to 14.7% while domestic debt rose from 27.6% to 29.3% as the government shifted to local sources of borrowing to reduce foreign exchange risks.

However, an alternative measure net debt-GDP ratio, which nets out the NG cash balance from the debt level, dropped from 39.6% to 39.2%. Net debt or debt net of cash balance is a stronger determinant of emerging country spreads than gross debt based on IMF Working Paper “Does Gross or Net Debt Matter More for Emerging Market Spreads?”, Metodij Hadzi-Vaskov and Luca Antonio Ricci, December 2016.

Meanwhile, net debt-to-revenue ratio dropped from 249.7% to 238.3% and net debt-to- expenditure ratio, from 214.6% to 203.7% implying the economy's higher capability to pay.

Interest payments (IP) as percentage of GDP increased slightly from 2.48% to 2.56% due to higher interest rates as the US Fed ended its quantitative easing and normalized its monetary policy. This led to global rise in interest rates.

As percentage of revenues, IP dropped from 15.68% to 15.67% and as % of expenditures, rose from 12.59% to 13.85% as a result of the delayed approval of the General Appropriations Act.

Debt service as percentage of GDP, expenditures and revenues all rose due to higher interest rates. Debt service-GDP rose from 5.06% to 5.23%; debt service-expenditures from 25.67% to 28.30%; and debt service-revenue from 31.98% to 32.01%.

The Department of Finance (DOF) viewed the proactive debt management has afforded the Philippines an expanded fiscal space as the level of debt has declined significantly from 87.2% of GDP in 2006 to 41.8% in 2018---a 45.4 percentage point decline.

Net debt, meanwhile, shows a bigger decline from 84.8% of GDP to 37.0%---a 47.8 percentage point decline. In general, first quarter 2019 debt statistics show continuation of the favorable trend toward debt reduction.