Diokno: Priority is economic growth to manage debt

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Metro Manila (CNN Philippines, July 8) — The government priority is for the economy to grow so that there will be enough resources to provide basic services while managing the country's debt, the Finance chief said on Friday, as the economic team bared indicators for recovery for the rest of the Marcos administration.

Finance Secretary Benjamin Diokno allayed fears over the debt stock now above the recognized international threshold of 60% of economic output, as he noted the need for growth to outpace borrowings.

“That’s really nothing to worry about. The way out of this is by growing at a faster rate. We simply outgrow our debt,” Diokno said at the briefing of the Development Budget Coordination Committee (DBCC), noting that the debt stock as a percentage of the economy was not high compared to that of other emerging economies.

The Cabinet-level DBCC is composed of the secretaries of Finance, Budget and Management, and Socioeconomic Planning, and the Bangko Sentral ng Pilipinas governor. The Budget chief now chairs the economic team.

Diokno said they expect the debt-to-GDP (gross domestic product) ratio to ease to 61.8% by the end of this year, dwindling gradually through the years until it falls below 60% by 2025.

The ratio is seen at 52.5% by the end of the Marcos administration in 2028, he said.

The debt-to-GDP ratio has ballooned under the administration of former president Rodrigo Duterte at 63.5% as of end-March as the government borrowed more to finance COVID-19 pandemic response efforts.

By end-2021, it was at 60.4% — the highest since 2005 under the Arroyo administration.

Meanwhile, Diokno said the government target borrowing to comprise 80% local and 20% foreign sources to reduce foreign exchange risks. The current sharing is 69.3% local and 30.7% foreign based on Treasury Bureau data.