Government debt portfolio continues to improve

MANILA, Philippines - The government’s debt portfolio continued to improve as maturities lengthened, data from the Department of Finance (DOF) showed.

The average government debt maturity lengthened to 10.18 years in 2011 as a result of the government’s debt liability management efforts.

The latest debt maturity profile is an improvement from the 8.8 years recorded in 2010 and the longest average maturity achieved since at least 2001, data also showed.

Specifically, the average maturity of domestic debt stretched to 9.21 years as of last year from 6.7 years while the average maturity of foreign obligations extended to 11.36 years from 11.34 years.

The government has also been successful in shifting the country’s debt profile in favor of the domestic debt market as part of efforts to cushion the country from foreign exchange risks.

As of end-2011, the debt mixture remained bias toward domestic funding.

As such, 58.03 percent of the country’s debts were sourced locally while 41.97 percent came from the international debt market.

In contrast, the debt mixture in the past years favored domestic funding.

In 2010, the debt mixture was 57.61 percent - 42.39 percent; in 2009, 56.18 percent - 43.82 percent and 57.20 percent - 42.80 percent which were all in favor of domestic sources.

With the improvement in the country’s debt maturity profile, Finance Secretary Cesar Purisima reiterated his call to credit rating agencies to reconsider their current below-investment ratings on the Philippines.

“We retain our position that the Philippines is underrated and that we deserve a second look as the market already rates us investment grade,” Purisima said.

The Philippines is currently rated one notch below investment grade by Fitch Ratings, while Standard & Poor’s Rating Services and Moody’s Investors Service rate it two notches below investment grade.

Rating agencies said they are waiting to see the passage of revenue measures that would result in sustainable improvement in the government’s revenue stream.

Nevertheless, Purisima said the Aquino administration remains committed to attaining its fiscal goals.

“We continue to manage our liabilities toward achieving our goals of lengthening our maturities, reducing our foreign exchange risks, lowering our borrowing costs and reducing the bunching-ups,” Purisima said.

The government expects the budget gap at P280 billion this year from P197 billion last year as it strives to boost spending.