Public Debt Philippines

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  • 1. Public Fiscal Administration Public Borrowing
  • 2. Theory of Public DebtWhat is Public Debt? money or credit owed by any level of government indirect debt of taxpayers INTERNAL DEBT EXTERNAL DEBT
  • 3. Theory of Public DebtWhat are the origins of Public Borrowing? European economists between 1500 and 1750Mercantilist Period are considered mercantilists. Era of merchant capital, dependent on connections between social and productive systems One of the greatest critics of mercantilism. He was strong in emphasizing the disadvantages of Adam Smith borrowing and expostulated on the advantages of the balanced budget during the years of capitalism.
  • 4. Theory of Public Debt Keynesian Theory of Deficit FinancingIt was during the time of John Maynard Keynes thatthe idea of public borrowing was introduced duringthe Great Depression, mainly as a compensatory toolin times of economic stability. “In order to keep people fully employed, governments have to run deficits when the economy is slowing.”Borrowing for capital generation purposes isnecessary like setting up public enterpriseswhich will contribute to a productive output.
  • 5. Theory of Public Debt Keynesian Theory of Deficit Financing WHY IT CANNOT WORK IN LDC’S1) Instabilities of LDC‟s are of external origin like oil crisis, inflation, andrecession in the industrialized countries.2) Keynes‟ theories are based on the assumption of fully developedeconomies undergoing cyclical difficulties. In LDC‟s productivecapacity is not yet fully developed.3) An example cited by fiscal administrators in the 60‟s was theEmergency Employment Administration during the Macapagal era wheredeficit financing was resorted to.
  • 6. Theory of Public Debt What are the origins of Public Borrowing? Development FinancePredicated on Foreign Borrowing. The expenditure demands of development are expensive and urgent. The only immediate option recommended by experts is borrowing, specifically foreign borrowing.Musgrave and Musgrave point out that in development finance, foreignborrowing is preferable.“Public investment which is financed by (local) borrowing does notadd to capital formation if it merely diverts funds otherwise availablefor private investment. If borrowing is from abroad, additionalresources become available as borrowing is accompanied byincreased imports.”
  • 7. Theory of Public DebtWhat are the origins of Public Borrowing? Development Finance Why Foreign Borrowing is preferred: 1. results in inflow of additional resources 2. covers up foreign exchange deficiencies due to development spending 3. facilitates the inflow of technical and managerial expertise Significant events during the development decades: 1. the sharp rise in borrowing activities of the LDCs 2. the emergence of the World Bank and International Monetary Fund as the dominant figures in development
  • 8. Theory of Public Debt What are the origins of Public Borrowing? Development Finance International Monetary Fund An international organization of Surveillance 184 member countries. It was 1)Abolition or liberalization of established to promote foreign exchange and import international monetary controls Financing cooperation, exchange 2)Devaluation of the exchange stability, and orderly exchange rate arrangements; to foster 3)Domestic anti-inflationary economic growth and high levels programmesTechnical Assistance provide of employment; and to 4)Greater hospitality to foreign temporary financial assistance to investment countries to help ease balance of payments adjustment.
  • 9. Theory of Public Debt What are the origins of Public Borrowing? Development Finance The World Bank By 1949, the bank shifted Originated from IBRD from reconstruction to (International Bank of development lending, with Reconstruction and focus on LDC‟s. Development) During the 1950‟s, loans to the goal was to assist in the LDC‟s were infrastructure recovery and reconstruction of related. Later on, it widened its countries devastated by WWII. scope to includeBy the end of the 90‟s, total loans and By the end of 1980, total loans and credits mining, agriculture, water, educcredits to amounted to $80 billion. to LDC‟s LDC‟s amounted to $2 trillion. ation, etc.
  • 10. Theory of Public Debt What are the origins of Public Borrowing? The International Structuralist Models Dependency Theory/Theory of Imperialism/ Neo-MarxistNeo-colonialism Dos Santos defines dependence as aViews the relationships conditioning situation where the economies of one group of countries are conditioned by theamong LDC‟s, advanced development and expansion of otherscountries, and the WB-IMF asthat of an imperialism. Conditions of dependency:common historical background; initial dependence on imports forThe colonial relationship is manufacturing requirements; heavy dependence onevident through political and imports of foreign technology; deep penetration byeconomic dominance, or foreign capital in the guise of transnationalwhat is called „neo-colonial‟. corporations; condition of cultural, psychological, social, and political independence.
  • 11. Theory of Public Debt What are the origins of Public Borrowing? The International Structuralist ModelsCheryl Payer, writer of the“Debt Trap”, cited that “the The Philippines in the early 80s was one ofWorld Bank has used its the top seven debtor countries and had afinancial power to promote Balance of Payment (BOP) deficit of $1.135the interests of billion, a trade deficit of $2.805 billion, and aprivate, international capital cash deficit of P14.4 billion.in its expansion to every Negotiations with IMF were formidable, suchcorner of the as, reduction of cash deficit to P9„underdeveloped‟ world.” billion, further restructuring of tariff rates and further devaluation of the peso.
  • 12. Structure of Philippine PublicDebt CROSS- SECTION Creditor Debtor Maturity Medium-TermOfficial Private Public Central Bank Private Short-term Long-Term Multilateral Banks Bilateral Suppliers credit Financial Institutions Others
  • 13. Structure of Philippine PublicDebtTIME-SERIES ANALYSIS external debt accumulation in the Philippines is Growth Trend characterized by an accelerating trend. public sector which includes mainly the National Debtor trend Government, GOCCs, and the Central Bank; and the private sector. Philippine major creditors-private commercialCreditor trend banks, financial institutions, and the official creditors consisting of multilateral and bilateral agencies. Debt-service interest payments alone on debts had trend continually risen. Net Resource measures the net flow of resources in a Transfer debtor-creditor relationship.
  • 14. NG DEBT NG Debt Nominal GDP NG Debt YEAR (Pm) current PHP to GDP 1990 600,205 1,077,237 55.72% 1991 672,788 1,248,011 53.91% 1992 870,814 1,351,559 64.43% 1993 1,125,892 1,474,457 76.36% 1994 1,081,155 1,692,932 63.86% 1995 1,158,622 1,905,951 60.79% 1996 1,155,237 2,171,922 53.19% 1997 1,350,574 2,426,743 55.65% 1998 1,496,221 2,665,060 56.14% 1999 1,775,356 2,976,905 59.64% 2000 2,166,710 3,354,727 64.59% 2001 2,384,917 3,631,474 65.67% 2002 2,815,468 3,963,873 71.03% 2003 3,355,108 4,316,402 77.73% 2004 3,811,954 4,871,555 78.25% 2005 3,888,231 5,444,039 71.42% 2006 3,851,506 6,032,835 63.84% 2007 3,712,487 6,648,245 55.84% 2008 4,220,903 7,497,535 56.30% Jun-09 4,227,107 7,537,612 56.08% 14
  • 15. NG FOREIGN DEBT Foreign Nominal GDP Foreign YEAR (Pm) current PHP to GDP Ratio 1990 299,764 1,077,237 27.83% 1991 334,898 1,248,011 26.83% 1992 372,897 1,351,559 27.59% 1993 449,025 1,474,457 30.45% 1994 416,177 1,692,932 24.58% 1995 440,227 1,905,951 23.10% 1996 413,180 2,171,922 19.02% 1997 600,966 2,426,743 24.76% 1998 645,290 2,665,060 24.21% 1999 796,952 2,976,905 26.77% 2000 1,098,510 3,354,727 32.75% 2001 1,137,234 3,631,474 31.32% 2002 1,344,266 3,963,873 33.91% 2003 1,651,327 4,316,402 38.26% 2004 1,810,734 4,871,555 37.17% 2005 1,723,938 5,444,039 31.67% 2006 1,697,428 6,032,835 28.14% 2007 1,511,320 6,648,245 22.73% 2008 1,806,475 7,497,535 24.09% 15 Jun-09 1,851,018 7,537,612 24.56%
  • 16. DOMESTIC NG DEBT Domestic Nominal GDP Domestic YEAR (Pm) current PHP to GDP Ratio 1990 300,441 1,077,237 27.89% 1991 337,890 1,248,011 27.07% 1992 497,917 1,351,559 36.84% 1993 676,867 1,474,457 45.91% 1994 664,978 1,692,932 39.28% 1995 718,395 1,905,951 37.69% 1996 742,057 2,171,922 34.17% 1997 749,608 2,426,743 30.89% 1998 850,931 2,665,060 31.93% 1999 978,404 2,976,905 32.87% 2000 1,068,200 3,354,727 31.84% 2001 1,247,683 3,631,474 34.36% 2002 1,471,202 3,963,873 37.12% 2003 1,703,781 4,316,402 39.47% 2004 2,001,220 4,871,555 41.08% 2005 2,164,293 5,444,039 39.76% 2006 2,154,078 6,032,835 35.71% 2007 2,201,167 6,648,245 33.11% 2008 2,414,428 7,497,535 32.20% 16 Jun-09 2,376,089 7,537,612 31.52%
  • 17. GOCC DEBT Domestic Foreign Contingent Contingent YEAR (Pm) (Pm) Debt (Pm) Debt to GDP 1990 4,422 96,502 100,924 9.37% 1991 4,669 91,012 95,681 7.67% 1992 5,023 100,550 105,573 7.81% 1993 5,207 137,668 142,875 9.69% 1994 5,585 140,732 146,317 8.64% 1995 6,218 160,699 166,917 8.76% 1996 6,229 170,382 176,611 8.13% 1997 7,646 265,780 273,426 11.27% 1998 8,677 295,515 304,192 11.41% 1999 8,320 358,544 366,864 12.32% 2000 12,451 469,647 482,098 14.37% 2001 23,167 472,610 495,777 13.65% 2002 21,065 570,673 591,738 14.93% 2003 22,635 685,904 708,539 16.42% 2004 33,135 800,573 833,708 17.11% 2005 48,183 538,167 586,350 10.77% 2006 72,113 497,814 569,927 9.45% 2007 64,968 419,216 484,184 7.28% 2008 72,905 472,672 545,577 7.28% Jun-09 89,034 491,473 580,507 7.70% 17
  • 18. Total Public Sector Debt Public Sector Nominal GDP % of Year Debt (Pb) (current, Pb) GDP 1998 2,522.5 2,665.1 94.6 1999 3,020.2 2,976.9 101.5 2000 3,623.8 3,354.7 108.0 2001 3,850.2 3,631.5 106.0 2002 4,369.1 3,963.9 110.2 2003 5,074.0 4,316.4 117.6 From 118% in 2003 (due to 2004 5,289.2 4,871.6 108.6 NPC IPP), it has 2005 5,033.9 5,444.0 92.5 fallen to 63% 2006 4,943.6 6,032.8 81.9 2007 4,773.6 6,648.2 71.8 2008p 4,726.3 7,497.5 63.0 2000 to 2008 1,102.5 4,142.8 26.6 2004 to 2008 (562.9) 2,625.9 (21.4) Source: BSP SEFI as October 28, 2009 18
  • 19. ECONOMIC IMPACT OF FISCAL REFORM NG Debt Nominal GDP NG Debt YEAR (Pm) current PHP to GDP 2004 3,811,954 4,871,555 78.25% 2005 3,888,231 5,444,039 71.42% 2006 3,851,506 6,032,835 63.84% 2007 3,712,487 6,648,245 55.84% 2008 4,220,903 7,497,535 56.30% Jun-09 4,227,107 7,537,612 56.08% 2004-2009 415,153 2,666,057 19
  • 20. National Government Debt Service CY 1995-2008(in million pesos) 1995 1996 1997 1998 1999 2000 2001 2002TOTAL DEBT SERVICE 137,175 117,742 125,649 164,509 205,396 227,843 274,439 357,959Interest Payments 72,658 76,522 77,971 99,792 106,290 140,894 174,834 185,861Interest Payments as % of GDP 3.81% 3.52% 3.21% 3.74% 3.57% 4.20% 4.81% 4.69% Domestic 50,805 59,002 58,350 73,525 74,980 93,575 112,592 119,985 Foreign 21,853 17,520 19,621 26,267 31,310 47,319 62,242 65,876Principal Payments 64,517 41,220 47,678 64,717 99,106 86,949 99,605 172,098Principal Payments as % of GDP 3.39% 1.90% 1.96% 2.43% 3.33% 2.59% 2.74% 4.34% Domestic 34,338 13,260 17,865 28,761 61,552 45,429 54,038 80,944 Foreign 30,179 27,960 29,813 35,956 37,554 41,520 45,567 91,154Debt Service as % of GDP 7.20% 5.42% 5.18% 6.17% 6.90% 6.79% 7.56% 9.03%Foreign IPs as % of GDP 1.15% 0.81% 0.81% 0.99% 1.05% 1.41% 1.71% 1.66% Domestic as % of GDP 4.47% 3.33% 3.14% 3.84% 4.59% 4.14% 4.59% 5.07% Foreign as % of GDP 2.73% 2.09% 2.04% 2.33% 2.31% 2.65% 2.97% 3.96%Total Domestic 85,143 72,262 76,215 102,286 136,532 139,004 166,630 200,929Total Foreign 52,032 45,480 49,434 62,223 68,864 88,839 107,809 157,030GDP Nominal (current ) 1,905,951 2,171,922 2,426,743 2,665,060 2,976,905 3,354,727 3,631,474 3,963,873 20
  • 21. National Government Debt Service CY 1995-2009(in million pesos) Fiscal space: Jan-Sep 2003 2004 2005 2006 of GDP 2% 2007 2008 2009*TOTAL DEBT SERVICE 469,990 601,672 678,951 854,374 614,069 612,682 549,016Interest Payments 226,408 260,901 299,807 310,108 267,800 272,218 235,283Interest Payments as % of GDP 5.25% 5.36% 5.51% 5.14% 4.03% 3.63% 3.12% Domestic 147,565 169,997 190,352 197,263 157,220 170,474 132,635 Foreign 78,843 90,904 109,455 112,845 110,580 101,744 102,648Principal Payments 243,582 340,771 379,144 544,266 346,269 340,464 313,733Principal Payments as % of GDP 5.64% 7.00% 6.96% 9.02% 5.21% 4.54% 4.16% Domestic 147,322 222,405 253,492 380,939 284,017 259,951 226,372 Foreign 96,260 118,366 125,652 163,327 62,252 80,513 87,361Debt Service as % of GDP 10.89% 12.35% 12.47% 14.16% 9.24% 8.17% 7.28%Foreign IPs as % of GDP 1.83% 1.87% 2.01% 1.87% 1.66% 1.36% 1.36% Domestic as % of GDP 6.83% 8.05% 8.15% 9.58% 6.64% 5.74% 4.76% Foreign as % of GDP 4.06% 4.30% 4.32% 4.58% 2.60% 2.43% 2.52%Total Domestic 294,887 392,402 443,844 578,202 441,237 430,425 359,007Total Foreign 175,103 209,270 235,107 276,172 172,832 182,257 190,009GDP Nominal (current ) 4,316,402 4,871,555 5,444,039 6,032,835 6,648,245 7,497,535 7,537,612 Q22009 per BTr 21
  • 22. FOREIGN DEBT Debt YEAR Foreign Foreign Debt (end of period; in $m) to GDP Ratio 1990 28,322 63.91% 1991 29,933 65.91% 1992 30,771 58.09% 1993 If we adjust for 34,687 63.80% resident ROP 1994 37,351 58.28% holdings of 1995 US$18bn, forei 37,697 50.86% 1996 gn debt to GDP 39,883 48.14% 1997 would be only 42,972 52.19% 21%1998 46,146 70.81% 1999 50,997 66.96% 2000 51,206 67.46% 2001 51,900 72.88% 2002 53,645 69.84% 2003 57,395 72.07% 2004 54,846 63.09% 2005 54,186 54.83% 2006 53,367 45.39% 2007 54,938 38.13% 2008 53,856 31.95% Note: 2007 & 2008 data are preliminary 22
  • 23. NG Foreign Bonds: 13x since 1995 Change 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 1995-2008 TOTAL 1,158,622 2,166,710 2,384,917 2,815,468 3,355,108 3,811,954 3,888,231 3,851,506 3,712,487 3,966,069 2,807,447Domestic Debt 718,395 1,068,200 1,247,683 1,471,202 1,703,781 2,001,220 2,164,293 2,154,078 2,201,167 2,338,569 1,620,174 NG Direct 678,007 1,049,083 1,233,825 1,462,950 1,701,484 1,998,926 2,161,999 2,151,784 2,198,873 2,336,275 1,658,268 Foreign bonds- 73% of Assumed 40,388 19,117 13,858 8,252 2,297 incremental external 2,294 2,294 -38,094 2,294 2,294 2,294 financing for public sectorForeign Debt 440,227 1,098,510 1,137,234 1,344,266 1,651,327 1,810,734 1,723,938 1,697,428 1,511,320 1,627,500 1,187,273 NG Direct 342,751 647,468 626,958 705,414 815,942 841,096 703,590 674,454 613,595 679,531 336,780 NG Foreign Bonds 76,144 437,570 498,645 629,037 827,400 963,846 1,017,082 1,021,916 897,653 947,906 871,762 Assumed 21,332 13,472 11,631 9,815 7,985 5,792 3,266 1,058 72 63 -21,269Bonds/Foreign Debt 17.3% 39.8% 43.8% 46.8% 50.1% 53.2% 59.0% 60.2% 59.4% 58.2% 73.4%Bonds/Debt 1.8% 20.2% 20.9% 22.3% 24.7% 25.3% 26.2% 26.5% 24.2% 23.9% 31.1% 23 Source: Bureau of Treasury
  • 24. Interest Payments & Debt Service to GDP Foreign Interest For. Debt Year Payments to Service to GDP GDP 1998 7.82 1999 old 8.70 concept 1999 new Debt service This translates 8.64 savings of to a net concept $10.1bn resource 2000 4.2 8.25 savings of US$4.1bn in 2001 4.1 9.17 2008 to finance import content 2002 3.4 10.10 of capex 2003 3.2 9.98 needed for growth! 2004 2.7 8.30 2005 2.8 7.71 2006 2.8 6.88 2007 2.5 5.33 2008 1.9 4.41 24 Source: BSP-SEFI
  • 25. Tensile Strength 300.0 70% 65% 250.0 60% 200.0 55% 50% 150.0 45% 40% 100.0 35% 30% 50.0 25% 0.0 20% 1998 2000 2002 2004 2006 2008 Feb 09 Apr 09 Jun 09 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jun 09 NPLs Total Loans to GDP Ratio 18.0 1.00 16.0 0.95 14.0 0.90 12.0 0.85 10.0 0.80 8.0 0.75 6.0 0.70 4.0 2.0 0.65 0.0 0.60 Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma 1998 2000 2002 2004 2006 2008 Feb 09 Apr 09 Jun 09 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 NPL to Total Loans Ratio Loans to Deposit RatioSource: BSP 25
  • 26. Monetary Policy- mostlycountercyclical 8.50 8.5% 8.00 7.50 7.5% 7.00 6.50 6.5% 6.00 5.50 5.5% 5.00 4.50 4.5% 4.00 3.50 3.5% Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2003 2004 2005 2006 2007 2008 RRP GDP Growth Rate Source: BSP and NSCB 26
  • 27. Huge IRD 27
  • 28. System for Public Debt Management Background on Public Debt This desire to borrow in order to spendFiscal deficits (the gap between more is usually justified by thegovernment revenues and total following:expenditures) are prerequisites to 1) development financeaccumulating debt. 2) cheap creditThe gap represents the difference 3) financing current expenditurebetween government revenuegeneration and the desired level ofspending of government . Ways on financing expenditure gaps:The absence of money to fully 1) raising taxesfinance its desired spending prompts 2) tapping domestic savingsa government to borrow. 3) monetary expansion 4) foreign borrowing
  • 29. System for Public Debt ManagementFour Stages of Public Debt (Angel Yoingco)Borrowing the Funds Spending the Funds Raising revenue for repayments Actual debt repayment
  • 30. System for Public Debt ManagementWhat is Public Debt Management and Why is it Important?It is the process of establishing and Governments should ensure that both theexecuting a strategy for managing level and rate of growth in their publicthe governments debt in order to: debt is fundamentally sustainable, and-raise the required amount of funding can be serviced under a wide range of-achieve its risk and cost objectives circumstances while meeting cost and-meet any other sovereign debt risk objectives.management goals the governmentmay have set Poorly structured debt in terms of maturity, currency, or interest rate composition and large and unfunded contingent liabilities have been important factors in inducing or propagating economic crises in many countries throughout history.
  • 31. System for Public Debt ManagementWhat is Public Debt Management and Why is it Important?Sound debt structures help Several debt market crises have governments reduce their highlighted the importance of exposure to interest rate, currency sound debt management and other risks. practices and the need for an efficient and sound capital market. Risky debt structures are often the consequence of inappropriate economic policies--fiscal, monetary and exchange rate--but the feedback effects undoubtedly go in both directions.
  • 32. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESDEBT MANAGEMENT FROM A MACRO PERSPECTIVE  Identification of priority areas for foreign financing  Determination of project viability and borrower’s capacity to pay  Assessment of country’s debt servicing capability Bangko Sentral ng Pilipinas
  • 33. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESINSTITUTIONAL ARRANGEMENTS FOR DEBT MANAGEMENT  Bangko Sentral ng Pilipinas  Department of Finance  Investment Coordination Committee  Inter-agency Committee for Review of Foreign Loan Documents  National Economic Development Authority  Development Budget Coordination Committee  Board of Investments Bangko Sentral ng Pilipinas
  • 34. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESLEGAL BASES  The Philippine Constitution – 15 October 1986  Letter of Instructions No. 158 – 21 January 1974  Foreign Borrowings Act (Republic Act 4860) – 8 September 1966  New Central Bank Act (Republic Act 7653) – 10 June 1993 Bangko Sentral ng Pilipinas
  • 35. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESBSP DEBT MANAGEMENT RESPONSIBILITIES  Monitoring the level of external debt  Keeping outstanding debt and debt burden at manageable levels  Obtaining the best available terms and conditions for foreign financing and avoid bunching of maturities Bangko Sentral ng Pilipinas
  • 36. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESBSP DEBT MANAGEMENT TOOLS  Regulatory issuances (policies and procedures)  Administrative mechanisms (approval and registration process; reporting system)  Observance of ceilings on new commercial MLT loans and outstanding ST public sector debt  Debt Strategies Bangko Sentral ng Pilipinas
  • 37. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESDEBT MONITORING SYSTEM The Philippine external debt monitoring system covers all data categories such as:  by borrower (public, private, bank and non-bank);  by original and residual maturity (short-term, medium- and long-term);  by creditor type;  by currency; and  by country Bangko Sentral ng Pilipinas
  • 38. EXTERNAL DEBT MANAGEMENT IN THE PHILIPPINESDEBT MONITORING SYSTEM The Philippine external debt monitoring system covers all data categories such as:  by borrower (public, private, bank and non-bank);  by original and residual maturity (short-term, medium- and long-term);  by creditor type;  by currency; and  by country Bangko Sentral ng Pilipinas
  • 39. Issues and Problems• Aquino inherited a government with a budget deficit of P298.5 billion in 2009 or 3.9 percent of gross domestic product (GDP). For 2010, the government has set a fiscal deficit of P300 billion or 3.6 percent of GDP. Actual collection in January to June 2010 indicates that tax revenues will likely fall short of target by P74 billion (about 0.9 percent of the GDP while non-tax revenues will likely fall short of target by 0.4 percent of GDP, according to Dr. Rosario Manasan, fiscal expert of the Philippine Institute for Development Studies.
  • 40. The current fiscal situation The Arroyo government almost achieved a balanced budget in 2007, which is on track with its Medium-Term Philippine Development Plan target. Congress passed landmark laws like value-added tax, excise tax and lateral attrition to increase revenue collection. But it fell through with the onset of the global crisis in the latter part of 2008 and early part of 2009. As percent of gross domestic product (GDP), fiscal deficit surged from less than 1 percent in 2007 and 2008 to 3.9 percent of GDP in 2009. As the fiscal deficit soared, so is the national government debt. Debt-to-GDP ratio went up from 56 percent of GDP in 2007 to 57 percent of GDP in 2008 and 2009. Although compared to the 78-percent debt-to-GDP ration in 2004 when the country had a fiscal crisis, the 57-percent debt- to-GDP ratio is still much lower.
  • 41. The current fiscal situation .. The Arroyo government’s economic team proposed to the Aquino administration to balance the budget within three to six years but it was received thumbs down. According to the new Department of Finance Cesar Purisima, the Aquino government does not intend to balance the budget in the next six years as President Aquino intends to focus on social services during his term. But according to DOF Undersecretary Gil Beltran, delaying the date of achieving a balanced budget may negatively affect the country’s creditworthiness. On the other hand, he said that pushing to wipe out the budget deficit ahead of the 2013 goal may also be too much for the country’s fragile fiscal position.
  • 42. The current fiscal situation .. For 2010, debt-to-GDP is projected to go down to 53.4 percent to 46 percent in 2013. The year 2013 will be a good time to the budget but a more realistic will be 2015. The Development Budget Coordination Committee (DBCC), the interagency committee that advises the President on macroeconomic targets, increased the budget deficit target this year to P325 billion or 3.9 percent of GDP instead of P293 billion or 3.5 percent of GDP. The DBCC is composed of the Department of Budget and Management, National Economic and Development Authority, Department of Finance and Bangko Sentral ng Pilipinas.
  • 43. Thankyou…