₱14.1-T Debt "Manageable" --- Diokno

Finance Secretary Benjamin E. Diokno said that the National Government’s (NG) outstanding debt, which reached a record P14.1 trillion as of end-May, is still manageable.

Photo Insert: The NG’s outstanding debt rose 1.3% to P14.1 trillion from P13.91 trillion at end-April. Year-on-year, it jumped 12.8%.

The government aims to cut the debt-to-GDP ratio to less than 60% by 2025, and further to 51.5% by 2028. As of end-May, the NG’s outstanding debt rose 1.3% to P14.1 trillion from P13.91 trillion at end-April. Year-on-year, it jumped 12.8%.

“The debt-to-GDP (ratio) before the pandemic was around 39% and then it went up because we had to borrow money for medicines, plus revenues went down,” Diokno said.

“As a result of the pandemic, it’s reasonable to assume, and in fact, the International Monetary Fund (IMF) has accepted, that 70% is the acceptable level of the debt-to-GDP because of the crisis,” he added.

National Treasurer Rosalia V. de Leon said that the government will still be able to lower its debt-to-GDP ratio even if it exceeds its borrowing program this year. This year, the government plans to borrow P2.2 trillion, consisting of P1.654 trillion from domestic sources and P553.5 billion from external sources.

“We have borrowed from the domestic market as of May around P880 billion, so we still have P770 billion for the last parts of the year,” she said. Ms. De Leon said that while the government may exceed its debt program this year, this will be managed through its debt servicing.

“We are repaying the debt, so it will be trimmed. What is important is the debt-to-GDP ratio. Our general government debt is even lower than our NG debt,” she said. According to Ms. De Leon, the general government debt-to-GDP ratio was at 54.7% as of 2022.

“This is the metric being looked at by credit agencies. In 2023, we’ll be hitting around 54% of general government debt, and by 2028, that will be about 48.5%,” she added. Ms. De Leon said that credit agencies are also “not concerned” about the country’s debt profile.

“They can see our debt profile continues to be resilient. Why? If you look at the composition, 68% is local currency, in peso. Most importantly, those with return on equity are held by residents, so that will not leave the country,” she said.

“Second, the average maturity of our debt portfolio is about 7.6 years, so it’s very manageable in terms of our repayment capacity. Even in terms of interest rates, only about 88% is fixed, so there is no repricing,” she added.

Diokno also noted that it is important to consider where the debt is being used.

“It’s not bad to borrow money. We are using the money for infrastructure. We are expanding the capacity of the economy. And also, productivity-enhancing measures, like the improvement of teacher education. That’s important,” he added.

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