THE country’s consolidated general government (GG) debt-to-gross domestic product (GDP) ratio rose in the first quarter of 2019, the Department of Finance (DoF) reported on Thursday.
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 38 percent from 36 percent a quarter earlier, it said in a statement.
In absolute terms, consolidated general government debt increased by 6.34 percent to P6.7 trillion from January to March from P6.3 trillion at the end of 2018.
Of the total, 62.68 percent or P4.2 trillion are domestic borrowings and 37.31 percent or P2.5 trillion are external.
In a comment, Rizal Commercial Banking Corp. economist Michael Ricafort said the higher ratio may be acceptable to some extent, as long as it is in a relatively gradual manner, in the sense that the growth in government debt should be close to the growth of the economy.
Ricafort also said higher government borrowings “may be needed at times to increase government spending especially for infrastructure and even spending on social services, such as education and health care…”
Any increase in government debt-to-GDP ratio may eventually be tempered if the country’s economy grows much faster in the coming years, he added.
The economist also said more fiscal/tax reform measures would also help increase the government’s structural and recurring tax revenue sources, which could reduce the state’s borrowing requirements that could eventually slow the growth of its debt stock.
For his part, IHS Markit APAC chief economist Rajiv Biswas said that, despite of the worsening ratio, the Philippines still has a relatively moderate one compared to the average for the advanced economies of the Organization for Economic Cooperation and Development.
“Nevertheless, the rise highlights to need to constrain the pace of growth of debt, to maintain a relatively moderate government debt ratio,” he added.
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.
The BSF can only be invested in government securities, and these holdings are considered intrasectoral and netted from the total outstanding national government debt.
In a breakdown, the Finance department said national government debt net of the BSF grew to P7.3 trillion, up 14.06 percent from last year’s P6.4 trillion.
“This was mainly driven by domestic debt, which grew by 16.4 percent while external debt increased by 8.0 percent over the same period,” it explained.
Local government debt, meanwhile, increased by 5.4 percent or P5 billion compared to the end of 2018.
The DoF also reported that social security institutions, such as the Government Service Insurance System and the Social Security System, did not contribute to the debt stock while simultaneously increasing their intrasector holdings of government securities by 63.4 percent.