MANILA, Philippines — The proportion of government debt to the country’s gross domestic product (GDP) rose to 36.4 percent in the second quarter last year due to higher expenditures and borrowings, the Department of Finance (DOF) said over the weekend.

In a report to Finance Secretary Carlos Dominguez III, the DOF’s Domestic Finance Group (DFG) said the general government’s debt-to-GDP ratio slightly expanded as of end-June 2017 to 36.4 percent from the 35.3 percent recorded in the same period in 2016.

This is also higher than the 35.2 percent general government debt-to-GDP ratio posted in the first quarter of 2017.

The DFG attributed the increase to the rise in the national government’s expenditures in 2017, which resulted in a higher deficit, thus higher borrowings.

“Debt ratios reflected the increase in programmed borrowings. The national government operations impact the most on the GG (general government) debt ratios,” the DFG said.

General government debt is comprised of the outstanding obligations of the national government, the Central Bank Board of Liquidators, social security institutions, and the local government units (LGUs), less intra-sector debt holdings of government securities.

Debt-to-GDP ratio is an indicator used by debt watchers and credit rating agencies to assess a country’s debt sustainability. A lower ratio indicates the government is generating more resources than debts, giving it more payment capacity.

According to the DOF data, total GG debt as of end-June 2017 amounted to P5.497 trillion, 12.5 percent up from P4.889 trillion the same period the previous year.

About 60 percent or P3.331 trillion of this amount came from domestic sources, while the remaining P2.166 trillion were sourced from foreign creditors.

The DFG said outstanding national government debt (net of the Bond Sinking Fund or BSF) increased to P5.84 trillion as of June last year due to the impact of peso depreciation.

Local government unit debt also reached P85.8 billion, an increase of 9.2 percent from the P78.6 billion posted the same period the previous year.

Intra-sector debt holdings, meanwhile, reached P432.8 billion, down from P489 billion the same quarter in 2016.

About P425.5 billion of this amount came in the form of government securities held by social security institutions, such as Social Secutiry System and the Philippine Health Insurance Corp. LGU loans held by the Municipal Development Fund Office (MDFO) also stood at P7.4 billion.

The country’s gross domestic product grew 6.7 percent in the second quarter of 2017. This is higher than the 6.4 percent economic growth recorded in the first quarter of last year, but slower than the seven percent posted in the same quarter in 2016.

Economic expansion during the quarter was driven by increased government spending, as well as the recovery of the agriculture sector.

Source: https://beta.philstar.com/business/2018/02/19/1789065/government-debt-gdp-ratio-expands-36-4#3Y3JL7fMLlCXQ7i1.99