June 03, 2013

Gov’t debt to economic output ratio drops to record low

General government debt accounted for 40.6%  GDP last year, the Department of Finance (DOF) said. It was the lowest since record began in 1998. General government debt is a broader measure of state liabilities considered by credit rating agencies in measuring the sustainability of sovereign debts.

The metric includes those incurred by both the national and local governments as well as social security institutions such as the Social Security System and Government Service Insurance System. It nets out those located in the “bond sinking fund” (BSF) which is the amount set aside and invested elsewhere by the state whenever it borrows money from the financial  markets.

According to the DOF, the decline could be traced from a dip in foreign debts as the Aquino administration decided to buy back P22.3 B worth of these liabilities using the BSF. For this year, the government has said it will not raise funding offshore and just take advantage of high domestic liquidity to meet its financing needs. - WealthSec