Debt-to-GDP ratio improves

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The ratio of general government debt against to gross domestic product (GDP) improved in the first half of 2015 despite a slight increase in the absolute level of debt, the Finance department said on Tuesday.

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Debt as a percentage of GDP dropped to 36.2 percent in the first six months of the year from the 37.3 percent recorded in the same period in 2014, the department said in a statement, adding that it was also a significant improvement from 44.3 percent in 2009 and 42.2 percent in 2010.

“The downward trajectory highlights the improving carrying capacity and sustainability of general government debt,” it claimed.

The government debt-to-GDP ratio is an indicator used by debt watchers to assess the creditworthiness of sovereigns.

General government debt stood at P4.7 trillion as of end-June 2015, up 4.4 percent from the P4.5 trillion posted in 2014.

Components of general government debt include the outstanding debt of the national government, the Central Bank Board of Liquidators, social security institutions and local governments, less the intra-sector holdings of government securities, including those held by the Bond Sinking Fund (BSF).

“The main contributor was the P193.2-billion rise in outstanding national government debt (net of the Bond Sinking Fund holdings),” the Finance department said.

It noted that the increase was primarily brought about by the national government’s financing operations and the impact of weaker peso on foreign debt comprising 37 percent of the government’s debt stock.

The agency also reported that local government debt eased by 3 percent to P67.5 billion compared to last year’s level of P69.7 billion “as a result of loan repayments and higher revenue, which provided local government units with the funds needed for operating and capital expenditures and the repayment of outstanding obligations.”

It added that social security Institutions such as the Government Service Insurance System and the Social Security System did not contribute to the debt stock but raised their holdings of government securities by 1 percent or P4.6 billion from last year’s level.

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