50% debt ratio by 2028 achievable—DOF

The Department of Finance (DOF) remained confident that the national government’s debt ratio would decline during the Marcos administration despite its recent uptick in the third-quarter.

Finance Secretary Benjamin E. Diokno said the government’s ability to pay its debts continues to improve given the the country’s robust pace of economic expansion and infrastructure investments.

While absolute level of debt may increase, Diokno noted the total debt of the national government as a share of gross domestic product (GDP) will drop to 50 percent by the end of President Marcos’ term.

“As long as the economy grows faster than the growth of public debt then level of debt becomes sustainable,” Diokno told reporter.

Before the pandemic, the government’s debt to GDP ratio was below 40 percent, but it went up to 62 percent this year after revenues fell while pandemic-related spending rose.

“With sustained, strong growth, expect the debt ratio to fall to about 50 percent by 2028,” the finance chief said. “What matters is the debt sustainability of debt.”

In third-quarter, the government debt ratio inched up further as new loans continued to pile up.

As of September 2022, the outstanding obligations of the national government as a share of GDP hit 63.7 percent, up 1.6 percentage points from 62.1 percent in June.

It is also rose from 63.5 percent in March and 60.4 percent in 2021.

Based on the Treasury data, the latest quarterly debt-to-GDP figure was the highest since 65.7 percent in 2005.

The end-September debt ratio is above the 60 percent international threshold deemed by debt watchers as manageable among emerging markets like the Philippines.

An elevated debt-to-GDP level puts the country’s investment-grade status at risk.

Last October, Fitch Ratings kept its negative outlook for the Philippines amid rising consumer prices, tightening financial conditions, and uncertainty in the global economic environment.

As of end-September 2022, the national government’s debt stock stood at P13.517 trillion.

Since 2019, the total debt of the national government ballooned from just P7.731 trillion, or 39.6 percent of GDP.

Last April, former Finance Secretary G. Dominguez III said the new administration should avoid accumulating additional debt and prioritize policies that will entice more economic activity.