Debt will stabilize as pandemic spending declines — DOF

The finance ministry said over the weekend that it expects the country’s debt-to-GDP ratio to stabilize as pandemic-related spending declines.

It said in an economic bulletin that the stock of national public debt eased slightly to 11.729 trillion pesos in the fourth quarter from 11.917 trillion pesos in the third quarter.

The DOF said the debt measure, as a percentage of gross domestic product, improved from 63.1% in the third quarter to 60.5% in the fourth quarter. He said that level was “still sustainable for an emerging economy.”

“The recent debt accumulation was largely in response to pandemic-related spending. However, the government continues to manage the debt wisely, maintaining a careful balance between domestic and external sources of financing, placing greater emphasis on the former to minimize the effects of external risks,” the ministry said.

He said fiscal consolidation and economic recovery would be very essential to preserve fiscal stability. “The debt-to-GDP ratio should stabilize as pandemic-related spending is reduced,” he said.

He said that in light of the Supreme Court’s decision in the Mandanas-Garcia case, delegating relevant functions to local government units, as enumerated in the 1991 LGU Code, would help ease the tax burden. of the national government.

“Note that the medium-term fiscal program shows a downward trend in the deficit largely due to spending growing more slowly than GDP, but infrastructure spending is not sacrificed. In addition, structural measures , such as reforming the pension system for military and uniformed personnel, will prevent further pressure building around fiscal loopholes,” he said.

The fiscal impact of the current MUP pension system is about 114 billion pesos per year, according to the 2021 fiscal risk statement.

“Resuming the pre-pandemic economic growth rate requires learning to live with the virus and accelerating recovery. We already have an infrastructure program underway and have reduced corporate income tax. The adoption of the amendments to the Civil Service Law and the Foreign Investment Law, as well as the recently amended law on the liberalization of retail trade, will have added a powerful ingredient to the economic recovery cocktail that can give a boost to the Philippine economy,” says the DOF.

The latest data from the Treasury Office showed that the total stock of national government debt at the end of December 2021 decreased by 1.7% to 11,729 billion pesos compared to the record of 11,931 billion pesos in November, thanks to better budgetary performance and lower financing needs.

Debt stock at end-December 2021, however, was 19.7% higher than the 9,795 billion pesos at December 2020. Its growth rate was slower than the 26.7% rise recorded at the same time. period a year ago.

About 30.3 percent of the total debt stock came from abroad, while 69.7 percent was domestic borrowing.

“The debt-to-GDP ratio was recorded at 60.5%, down from 54.6% a year ago, but still within the accepted sustainability threshold as the economy continues to recover from the effects of the pandemic. “, said the Treasury.

Domestic debt stood at 8.17 trillion pula at the end of December, or 271.09 trillion pula, 3.2% lower than the level at the end of November 2021, the repayment of the provisional advance of 540 .00 billion pula of Bangko Sentral ng Pilipinas having exceeded the net issuance of public securities.

The Treasury said that on an annual basis, domestic debt increased by 1,480 billion pesos, or 22.0 percent, in line with the domestic borrowing program which promotes domestic issuance to mitigate currency risk and support development. of the local capital market.

External debt of P3,560 billion at the end of December was P67.81 billion, 1.9% higher than in November.