Debt-to-GDP hits record low in Q1

MANILA, Philippines – The government’s debt-to-GDP eased to 48.9% in the first quarter, reflecting a lower share of the country’s economic output being allocated for debt payments.

The end-March debt-to-GDP was lower than the 51.5% ratio as of end-December 2012, which was the lowest since 1998.

In a statement on Friday, May 31, the Department of Finance attributed the improvements to the national governments’ proactive liability management, a strategy that includes retiring or extending the terms of the government’s existing debts.

The government has successfully reduced the foreign component of the general government debt, declining to 44.1% in 2012 from 50.2% in 2011.

Similarly, the foreign component of national government’s debt also drop to 17.4% of GDP at the end-March from 18.6% at end-2012.

“The government remains committed to its proactive liability management agenda. The improvement in our debt statistics is the result of our policy of structural fiscal sustainability,” Finance Secretary Cesar Purisima said in s statement.

In particular, the government in November 2012 bought back P22.3 billion foreign currency debts via a Tender-Offer transaction and through its Bond Sinking Fund (BSF).

Others included the move to retire the remaining foreign obligations of the old Central Bank. These debts were fully paid in January 2012.

The government increased its holdings of government debts by the Social Security Institutions (SSIs). Intra-sector debt holdings by SSIs rose from P409.6 billion to P453.7 billion from 2011 to 2012.

The country’s GDP has also been expanding. It grew 7.8% in the first quarter, one of the fastest pace of growth in the world. – Rappler.com