Senator questions ability to pay soaring govt debt

Metro Manila (CNN Philippines, November 11) — A Senate leader on Thursday sounded the alarm on the country's ability to pay its loans is it breached the debt limit as a percentage of economic growth.

Senate Minority Leader Franklin Drilon said during budget plenary debates that the national debt stock is now at 61.3% of economic output or gross domestic product (GDP) as of end-September, according to latest Treasury data.

He noted this surpassed the 60% global standard to assess a country's ability to pay its debts. Analysts said credit rating agencies keep an eye on debt levels, especially with the COVID-19 pandemic weighing on economic growth.

But Senate Finance Committee chairman Sonny Angara — who speaks in behalf of economic managers during the plenary session — said countries have an allowance to spend more on credit in extreme situations.

“In normal times, it's 60% of debt as percentage of your GDP. But in abnormal times like now, the IMF (International Monetary Fund) has revised that figure to go up to 70%. Most countries now have breached their predicted deficit levels,” said Angara.

The lawmaker, who is also principal sponsor of the 2022 General Appropriations Bill, also cited countries like India, Singapore, and Malaysia with debt-to-GDP ratios higher than the Philippines.

“I think the goal of Finance Secretary [Carlos] Dominguez and the other economic managers to be somewhere in the middle. Our credit rating is not affected and consumers and the government can still avail of favorable credit terms,” he further explained.

The debt-to-GDP ratio as of the third quarter was the highest since the 65.7% level in 2005 under the administration of Gloria Macapagal-Arroyo, according to Treasury figures.

Citing the economic team, Angara noted the percentage of loans compared to the economy will be kept within the 60% range even as government incurs more debt as growth expands.

Outstanding loans ballooned to a new ₱11.9-trillion high in September as authorities borrowed more to beef up the COVID-19 war chest. Angara said this figure is expected to ease to ₱11.7 trillion by year-end due to net payments. 

Drilon said "loans (should) go to the productive side of our economy rather than the pockets of corrupt officials.”