Debt-to-GDP ratio improves in 2016

The proportion of government’s debt to gross domestic product (GDP) improved in 2016 due to debt management measures and robust economic growth during the period, the Department of Finance (DOF) reported yesterday.

In a statement, the DOF said the government’s debt-to-GDP ratio in 2016 eased to 34.6 percent as compared to the 36.2 percent posted in 2015.

The DOF attributed this improvement to the government’s cash and debt management reforms, as well as the sturdy economic growth in 2016.

General government debt comprises of the outstanding obligations of the national government, the Central Bank Board of Liquidators, social security institutions and the local government units (LGUs), less intra-sector debt holdings of government securities.

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 debt, giving it more payment capacity.

According to the DOF, the lower debt-to-GDP ratio came despite the higher nominal general government debt recorded in 2016.

As of end-2016, general govern- ment debt stood at P5.016 trillion, 3.9 percent up from the end-2015 level of P4.829 trillion.

More than half or P2.933 trillion of this amount was accounted for by domestic borrowings, while P2.084 trillion came from foreign creditors.

“The rise in the nominal (general government) debt was primarily due to the 3.8 percent increase in the consolidated national government debt (net of the bond sinking fund) to P5.456 trillion from the end-2015 level of P5.256 trillion,” the DOF said.

The agency said this was brought about by the net issuance of domestic securities, year-onyear peso depreciation, and the decline in BSF holdings.