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Gov’t sets lower debt payments in 2015

The national government has earmarked a much lower budget for debt payments next year as the Aquino administration continues its liability management program that also aims to deepen the country’s capital market.

Data from the Department of Finance (DOF) showed the government plans to spend P763.25 billion to partially settle the nation’s multi-trillion peso debts, lower by 7 percent compared with P819.19 billion this year.

Based on the 2015 program, the government is setting aside P372.86 billion for interest payments, up 6 percent from P352.65 billion this year. Of that next year’s total, domestic obligation is getting P277.56 billion, while offshore secures the remainder P95.3 billion.

Meanwhile, the government’s servicing for principal amortization for next year is set at P390.38 billion, lower by 24 percent compared with P315.58 billion in 2014. Of that amount, domestic lenders will get P315.14 billion, while foreign banks have P74.8 billion.

But despite the decline in debt servicing budget, the national government’s total outstanding obligation as a proportion of the country’s whole economy is expected to slide further next year.

According to the DOF, the government outstanding debt as a percentage of the economy, which is measured by gross domestic product (GDP), would correspondingly decline to 45.6 percent next year from 46.2 percent this year.

National Treasurer Rosalia B. de Leon said the improvements in debt ratio reflect the government’s improved fiscal space due to the Aquino administration’s proactive liability management program and corporate governance reforms.

De Leon added that the healthy debt-to-GDP trend was a major component in the investment grade rating the government secured last year from the three major international credit rating agencies.

The debt-to-GDP ratio, one of the key indicators closely watched by major international credit rating agencies, is a measure of the government’s capacity to settle its obligations.

The drop in debt-to-GDP ratio is also in line with Aquino administration’s goal of reducing it to below 45 percent by 2016, which will be driven by the government’s effort to boost further its tax collections through efficiency as well as proactive debt liability management agenda.

Since the Aquino administration took office in 2010, the government debt-to-GDP ratio has been in a declining trajectory from a high of 54.8 percent in 2009.

As of May this year, the outstanding debt of the national government reached P5.632 trillion, translating to roughly P56,320 debt for every Filipino based on a 100 million population.

Data from the Bureau of Treasury showed the national government’s total obligation to the country’s foreign and local creditors at end-May increased by 5 percent year-on-year from P5.364 trillion.

Of the total debt stock, domestic debt accounts for 66 percent, while the rest comes from external borrowing.

As of May, the government debt stock in the domestic market amounted to P3.705 trillion, higher by 7.1 percent from P3.461 trillion, while foreign debt increased 1.3 percent year-on-year to P1.926 trilion from P1.902 trillion.