RP debt to increase by P234-B next year

Posted on August 26, 2009 blogtopia

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rp_stock_xchange MANILA – The country’s debt stock is expected to increase by up to P234 billion next year as the government eyes more borrowings to help boost economic output.

According to the Finance Department, the Philippines’ outstanding debt may hit P4.723 trillion or 56.7% of gross domestic product (GDP) in 2010 from the projected P4.489 trillion or 57.6% of GDP this year.

Next year’s debt estimate is higher than the earlier target of P4.698 billion or 56.3% of GDP. The higher debt is an offshoot of the decision of economic managers to raise the country’s budget deficit ceiling next year to P233.4 billion or 2.8% of GDP instead of the revised P208.4 billion or 2.5% of GDP.

Of the P4.723 debt next year, P2.771 trillion would represent what is owed to domestic creditors, and P1.952 trillion to foreign creditors.

The Philippines borrows heavily to pay off maturing obligations and finance its budget deficit.

Finance Undersecretary Gil Beltran said the increase in the country’s debt stock would fund the government’s expenditure program which is needed to keep the economy afloat.

"We are pump-priming the economy, but it won’t be forever," Beltran stressed.

He pointed out that the government should not allow its deficit to increase steadily just to be able to spend more.

"It is not a prudent fiscal policy if you allow the deficit to exceed 3% for 2 years," he said.

Beltran added that the Philippines intends to get back on track with its fiscal consolidation program starting next year.

The Arroyo administration was targeting to balance the budget in 2008, but decided to abandon the goal due to adverse external developments.

Last year, the Philippines’ budget deficit swelled to P68.1 billion or 0.9% of GDP. This is expected to hit a record high of P250 billion or 3.2% of GDP this year.