‘Economic growth helps improve govt debt-to-GDP ratio’

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THE general government (GG) debt-to-gross domestic product (GDP) ratio improved in the first nine months of 2016, the Department of Finance (DOF) reported on Thursday.

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DOF data showed the general government debt-to-GDP improved to 35.5 percent as of end-September from 36.7 percent a year earlier, but not when compared with the 35.4 percent as of end-June.

The ratio is measure used by credit Fitch Ratings, Moody’s Investors Service and S&P Global Ratings to assess the creditworthiness of sovereign debt or borrower.

General government debt consists of the outstanding obligations of the national government, the Central Bank Board of Liquidators, social security institutions and the local governments minus the amount allotted to the Bond Sinking Fund (BSF) as cover for maturing bond obligations.

In absolute terms, general government debt increased by 4.2 percent to P5.02 trillion as of end-September 2016 from P4.81 trillion a year earlier.

“Despite the rise in nominal debt, the GG debt-to-GDP ratio has gone down to 35.5 percent from 36.7 percent in Q3 2015 due to the sustained improvement in the economy,” Finance Undersecretary and Ch ief Economist Gil Beltran said in an emailed statement.

While the general government debt grew during the period, it was offset by higher GDP growth. The GDP grew by 6.9 percent in January to September 2016.

“Domestic borrowings accounted for more than half of the total GG debt at P2.909 trillion, while the remaining P2.113 trillion were sourced from external lenders,” Beltran said.

Citing DOF data, Beltran revealed that the rise GG debt was mainly due to the 2.5 percent increase in national government (NG) debt to P6.087 trillion from P5.936 trillion.

“NG debt net of the BSF holdings reached P5.447 trillion, 3.9 percent higher than the P5.242 trillion during the same period in 2015 as a combined result of peso depreciation (P1.53 year-on-year) and lower BSF holdings,” he said.

Local government debt grew by 11.4 percent to P77.3 billion from P69.4 billion.

“The increase in borrowings is to be used for procurement, financing public services as well as economic enterprises,” Beltran said.

Intrasector debt holdings reached P503.1 billion, up 2.0 percent from P493.0 billion, as social security institutions increased their holdings of Government Securities by P10.1 billion.

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