RP govt trims debt by P36.7b

PHILIPPINE NEWS SERVICE — The ability of the government to pay more due to its strong fiscal position and the strengthening of the peso against the US dollar enabled the Philippines to reduce debt stock by close to 1 percent last year.

National Treasurer Omar Cruz reported yesterday that the government debt reached P3.851 trillion or 64 percent of gross domestic product last year, down P36.7 billion from P3.888 trillion or 72 percent of GDP in 2005.

This means that each of the 88.7 million Filipinos has an average debt of P43,421.65.

Cruz said the lower debt was a result of a reduction in borrowings after the government brought down its budget deficit to its lowest level in eight years.

The national government trimmed the budget shortfall to P62.2 billion or 1.04 percent of GDP last year from P146.8 billion or 2.7 percent of GDP in 2005. This was less than half of the programmed P125 billion or 2.1 percent of GDP for 2006.

Statistics showed that about 56 percent or P2.154 trillion of the government’s total outstanding debt stock last year came from domestic sources while 44 percent or P1.697 trillion were obtained from foreign creditors.

Domestic debt declined P10.2 billion from P2.164 trillion in 2005 while foreign debt plunged P26.5 billion from P1.723 trillion.

Cruz said the decline in domestic debt could be attributed to the decision to issue less government securities and redeem more treasury bills or treasury bonds due to its strong fiscal position.

He said the government slashed its foreign debt after gaining P13 billion from the appreciation of the peso and third currencies against the greenback and another P13 billion from net repayments.

A study conducted by the Department of Finance show the Philippines saves as much as P5.14 billion for every percentage point decline in interest rates and P4.4 billion for every unit of appreciation of the peso against the greenback.

Data from the Bureau of Treasury show that the country’s foreign debt consisted of P1.021 trillion in bonds, of which P927 billion are denominated in US dollar, P74.2 billion in euros and P20.6 billion in Japanese yen. Another P674.4 billion are in the form of direct loans.

The Philippines relies heavily on foreign and domestic borrowings to finance its budget deficit as the government cannot raise enough revenues to bankroll expenditures.

Cruz said the government also relied heavily on its debt consolidation program.

“This is a result of the Republic’s debt consolidation program in line with its goal to bring down the debt down to 56 percent of GDP by 2008,” Cruz said.

As part of its fiscal consolidation program aimed at achieving a balanced budget by the end of 2008, the government hopes to trim the country’s debt stock to 51.7 percent of GDP next year, 45.8 percent of GDP by 2009, and finally to 40.7 percent of GDP by 2010.