THE general government (GG) debt-to-gross domestic product (GDP) ratio rose in the first half of 2017 on the back of a higher budget deficit, the Finance department reported during the weekend.
The ratio — used by debt watchers such as Fitch Ratings, Moody’s Investors Service and S&P Global Ratings to assess the creditworthiness of sovereign borrowers — worsened to 36.4 percent from 35.3 percent a year earlier, the department said in a statement.
In absolute terms, general government debt increased by 12.4 percent to P5.497 trillion as of end-June 2017 from P4.889 trillion a year earlier, with 61 percent (P3.331 trillion) comprising domestic borrowings and 41 percent (P2.166 trillion) from foreign creditors.
General government debt consists of outstanding obligations of the national government, Central Bank Board of Liquidators, social security institutions and local governments, minus the amount allotted to the Bond Sinking Fund (BSF) to cover maturing bond obligations.
In a report to Finance Secretary Carlos Dominguez 3rd, the department’s Domestic Finance Group (DFG) said that as national government expenditures picked up, “debt ratios reflected the increase in programmed borrowings. The national government operations impact the most on the GG debt ratios.”
National government debt (net of BSF) reached P5.8 trillion, up by 10.3 percent from P5.3 trillion as of the end of June 2016.
Because the BSF can only invest in government securities and these holdings are considered intra-sectoral and netted from total outstanding national government debt, the decline in BSF holdings, combined with peso depreciation, led to higher outstanding national government debt for the period, the DFG explained.
It also bared that local government debt reached P85.8 billion, an increase of 9.2 percent compared to the P78.6 billion posted during the same period in 2016.
Lastly, government debt securities held by social security institutions declined by P59.7 billion, far outweighing local government loans held by the Municipal Development Fund Office that was up by P3.5 billion.
The budget deficit as of the first half of last year was 28 percent wider at P154.5 billion from P120.3 billion a year earlier, surpassing the programmed P143.8 billion as expenditure growth surpassed that of revenues.
Last month, meanwhile, the Treasury bureau announced that national government debt had risen to a record P6.65 trillion in 2017, up by 9.25 percent or P562.17 billion from 2016 due to factors such as pre-funding for this year’s spending requirements.
It was equivalent to 42.1 percent of GDP, which the Treasury stressed was unchanged from 2016. The result, however, was higher than the 40.7 percent target presented during a Development Budget Coordination Council meeting last June.