Debt-to-GDP ratio down to 45.4% in Dec

MANILA, Philippines - The country’s debt as a proportion of the country’s economy  declined further  last year, reflecting the government’s successful efforts to manage finances and ensure economic resurgence.

Data from the Bureau of the Treasury showed that the government’s debt-to-GDP (gross domestic product) ratio  eased to 45.4 percent at the end of December 2014 from 49.2 percent the  previous year.

The debt-to-GDP ratio, which peaked at 78.1 percent during the 1998 Asian currency  crisis, has been on a downward trajectory in the past three years as the government stepped up efforts to manage the country’s debt.

The Aquino administration’s goal is to reduce the debt-to-GDP ratio further to below 45 percent by the end of its term in 2016.

“The improvement in the country’s debt ratio could be attributed to the combined effects of strong economic growth and the marginal increase in nominal debt brought about by reduced borrowings due to the lower deficit turnout,” the BTR said in a statement.

Efficient liability management strategies were credited to the decline in the debt-to-GDP ratio.  These include the policy of borrowing more from the domestic market than from lenders overseas to fend off a potentially destabilizing swing of the exchange rate.

As of the end of 2014, the government’s outstanding debt stood at P5.73 trillion, higher by one percent or P54.1 billion over the year earlier.  Of the total, 66.6 percent or  P3.82 trillion accounted for domestic debt which marked an increase of 2.3 percent from the end-2013 level.

The remaining P1.91 billion was sourced from foreign lenders.  The amount represented a decline of 1.7 percent or P33.1 billion due to revaluation caused by adjustments in third currencies.

According to the BTR, debt maturity remains at accommodating levels, mitigating the need to immediately refinance debt over the near-term.  The average maturity for the total debt portfolio stands at 9.9 years and stays at the upper bound of the medium-term debt target of seven to 10 years.

“Furthermore, with only 6.8 percent of the portfolio set at floating rates, government debt is less susceptible to rate fluctuations and increases certainty in projecting debt servicing requirements,” the BTR said.

The cost of servicing debt likewise declined with the weighted average interest rate (WAIR) of the portfolio trending downward. WAIR for domestic and external obligations is at 5.7 percent and 4.8 percent by the end of December last year.