Gov’t debt may top P7 trillion in 2018 amid infra push

THE GOVERNMENT’S outstanding debt may breach the P7 trillion mark next year, according to the Treasury bureau.

Amid preparations for the Budget Expenditures and Sources of Financing report for next year, National Treasurer Rosalia V. De Leon said that they have given the Budget department a P7.05 trillion debt forecast to be programmed in the general appropriations act.

“For 2018, its P7.05 trillion,” she told reporters late last week when asked for its debt program next year.

The projected rate of increase for the 2018 debt is 8.96% against the downward-adjusted P6.47 trillion outstanding debt in 2017. The growth rate compares to 6.24% between 2016 and 2017.

However in terms of the share of the country’s economy, the projected total is 39.7% of gross domestic product (GDP) from the 40.76% ratio for this year and 42.18% in 2016.

Asked for the economic implications of higher debt, Finance undersecretary Gil S. Beltran said that the growing economy will outpace the rise in debt.

“It’s just a number. Actually it’s nominal so even if the number increases the value of that debt decreases, because over time it’s subject to inflation. So the best measure is actually percentage of GDP because that is the level of resources that a country generates,” he said.

“Payments come out from production -- the goods and services that are produced. It is always measured in terms of percent of GDP. And (the share) is going down,” said Mr. Beltran, who is also the Finance department’s chief economist.

He said that the globally accepted standard of a safe debt ratio is 50%.

Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion said his asessment of the debt will depend on the success of tax reform.

“It is fiscally sound, as long as the government sticks to its targets, particularly that of the needed reforms in taxes and improvements in the general collection of taxes. In all fairness, government has been collecting more and is expected to collect more when the new taxes are in place,” he said.

“Fiscal discipline is important moving forward. If the fiscal reforms are not instituted as expected and planned, there might be difficulty meeting the targets and the overall plan of making lives better for all will be undermined.”

The tax reform program aims to raise government revenue by making the tax system more efficient, by removing some tax exemptions, harmonizing estate and donor taxes, increasing petroleum and automobile excise tax rates while reducing personal income tax rates.

The government had a P6.345 trillion debt as of end-May, growing 7.8% from a year earlier. The outstanding debt was at 98.07% of the P6.47 trillion programmed for this year.

Over 65% or P4.14 trillion of this amount is owed to domestic lenders, while the P2.21 trillion remaining obligation was borrowed from external sources.

The government borrows to plug its fiscal deficit, and to likewise pay down maturing debt. It aims to maintain an 80-20 borrowing mix, in favor of domestic sources.

The government has secured official development assistance (ODA) packages and concessional loans from regional partners such as China, Japan and South Korea, noting their willingness to participate in building up the country’s infrastructure.

“[The debt] has to increase because we are building infra,” said Mr. Beltran. -- Elijah Joseph C. Tubayan