Debt-to-GDP ratio rises to 56.2% in Q1

The share of the national government’s debt to gross domestic product (GDP) rose to 56.2 percent in the first quarter due to the country’s advanced borrowing activities ahead of the projected adjustments in US interest rates, the Department of Finance (DOF) reported yesterday.

This was higher than the debt-to-GDP ratio in the same period last year, which was recorded at 55.2 percent.

However, net of the national government’s cash balance, the country’s net debt-to-GDP ratio during the period dropped to 39.6 percent from 40.1 percent a year ago.

Debt-to-GDP ratio is an indicator used by debt watchers and credit rating agencies to assess a country’s debt sustainability. A lower ratio indicates the government is generating more resources than debts, giving it more payment capacity.

According to DOF data, the share of domestic debt to GDP in the first quarter rose to 36.5 percent from 35.4 percent posted in the same period last year.

The DOF attributed this to the retail Treasury bond (RTB) issuance conducted by the Bureau of the Treasury (BTr) in December last year to take advantage of favorable rates ahead of the US Federal Reserve’s projected policy adjustments.

The bond sale generated P255.4 billion in new money for the government at a coupon rate of 4.625 percent.

On the other hand, the DOF said external debt-to-GDP ratio slightly declined to 19.7 percent from 19.8 percent.

“The excellent design and timing of borrowings has allowed the government to tap cheaper rates and longer maturities with higher volumes, enabling the government to optimize savings for the Build Build Build program and social expenditures,” the DOF said.

Meanwhile, the DOF said the ratio of debt to revenue dropped to 268.6 percent as of end-March from 273.9 percent a year ago.

Debt-to-expenditure ratio likewise dropped to 230 percent from 240.5 percent.

For its part, interest payments as a percentage of GDP remained stable at 0.66 percent. Interest payments as percentage of revenue and expenditure, however, dropped to 4.19 percent and 3.59 percent, respectively.