DOF Economic Bulletin on Debt Ratios, 22 May 2018
The National Government (NG) debt-GDP ratio rose from 55.2% as of end-March 2017 to 56.2% as of end-March 2018 as the country advanced its borrowing ahead of the projected triple adjustments in the Fed policy rate. (Table 1).However, net debt-GDP ratio which nets out the NG cash balance from the debt level, dropped from 40.1% to 39.6%.*/
The Treasury issued P255.4B in Treasury Bonds in December 2017 at 4.625% to take advantage of favorable rates. Thus, domestic debt rose to 36.5% of GDP from 35.4% the year before offsetting the decline in the external debt.
Meanwhile, debt-to- revenue ratio dropped from 273.9% to 268.6% and debt-to- expenditure ratio dropped from 240.5% to 230.0%.
Interest payments as % of GDP remained stable at 0.66%. As % of revenues, however, they dropped to 4.19% and 3.59%, from 4.33% and 3.8%, respectively.
Debt service as % of GDP, expenditure and revenues all dropped. Debt service-GDP dropped from 1.48% to 1.38%; debt service-expenditure from 15.92% to 13.78% and debt service-revenue from 4.33% to 4.19%.
Table 3. DEBT RATIOS
2017 Mar 2018 Mar
DEBT-GDP RATIO 55.2% 56.2%
DOMESTIC DEBT 35.4% 36.5%
EXTERNAL DEBT 19.8% 19.7%
NET DEBT-GDP RATIO 40.1% 39.6%
DEBT-REVENUE RATIO 273.9% 268.6%
DEBT-EXPENDITURE RATIO 240.5% 230.0%
INTEREST PAYMENTS-GDP RATIO 0.66% 0.66%
INTEREST PAYMENTS-REVENUE RATIO 4.33% 4.19%
INTEREST PAYMENTS-EXPENDITURE RATIO 3.80% 3.59%
DEBT SERVICE-GDP RATIO 1.48% 1.38%
DEBT SERVICE-EXPENDITURE RATIO 15.92% 13.78%
DEBT SERVICE-REVENUE RATIO 4.33% 4.19%
Sources: Bureau of the Treasury, Philippine Statistics Authority
*Net debt or debt net of cash balance is a stronger determinant of emerging country spreads based on IMF working paper “Does Gross or Net Debt Matter More for Emerging Market Spreads?”, Metodij Hadzi-Vaskov and Luca Antonio Ricci, December 2016.
DOF View
Proactive debt management has afforded the Philippines an expanded fiscal space as the level of debt has declined significantly from 87.2% in 2006 to 42.1% in 2017---a 45.1 percentage point decline. Net debt shows a bigger decline from 84.8% to 39.0%---a 45.8 percentage point decline.
The excellent design and timing of borrowings has allowed government to tap cheaper rates and longer maturities with higher volumes, enabling government to optimize savings for the Build, build, build program and social expenditures.
