Gov’t looks to maintain 50% debt ratio

The government is keeping an eye on its debt-to-gross domestic product (GDP) level, ensuring that it does not breach the regional average to safeguard the country’s fiscal sustainability, according to the Department of Finance (DOF).

In an interview with “The Chiefs” on Cignal TV’s One News, Finance assistant secretary Antonio Lambino said the government’s policy is to maintain its debt-to-GDP ratio at around 50 percent.

“As a matter of policy, what we want to do is to stay within the median of the region. So that would be around 50 percent,” Lambino said.

“Another way of looking at it is our deficit, because the deficit is covered by borrowings. The estimate of the DBCC (Development Budget Coordination Committee) of the economic team is we will be at around 8.4 percent for this year.

We can go up to maybe nine percent, which would be equivalent to around 50 percent debt-to-GDP,” he continued.

According to Lambino, the country’s debt-to-GDP ratio reached a high of 74.4 percent in 2004.

However, he said the government was able to reduce this to an all-time low of 39.6 percent by the end of 2019 on the back of solid economic growth and sound fiscal management.

For 2020, the government is planning to ramp up its borrowings as it expects fiscal deficit to widen to around P1.613 trillion or 8.4 percent of the GDP due to the coronavirus disease 2019 or COVID-19.

According to latest data from the DOF, the national government’s total borrowings in the first four months of the year has reached P1.22 trillion, bulk of which was sourced domestically.

Outstanding debt as of end-May also stood at a record high of P8.89 trillion.

Even with the increase in borrowings, Lambino reiterated that the government was able to get good repayment terms, particularly for the official development assistance (ODA) it secured from various multilateral agencies.

“I think the longest payment term is around 40 years. So we’re looking at long repayment terms and low interest rates because our credit rating is good,” he said.

Last month, Japan Credit Rating Agency upgraded the country’s credit rating to A- from BBB+, as it noted the Philippine economy’s resilience even amid the COVID-19 pandemic.