DOF to keep national debt below 50% of the size of economy

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Metro Manila (CNN Philippines, June 18) – The Department of Finance said the government will keep the country's borrowings at half the size of the local economy to allay fears that Philippines will drown in debt.

Department of Finance Spokesperson Tony Lambino said Thursday that the country is not over-borrowing to respond to the COVID-19 outbreak, adding that the economy is coming from a strong position prior to the pandemic.

Additional loans incurred for the coronavirus response will push the debt burden up, but at a level that will still be manageable for the economy to settle.

"We will keep it to within the 50 percent range, ayaw natin na lumagpas sa 50 percent na debt-to-GDP. 'Yan po ay naglalagay sa atin sa kalagitnaan ng ating mga peer countries. We want to stay in that area," Lambino said in a Malacañang briefing.

[Translation: We will keep it to within the 50 percent range, we don't want to go past 50 percent of debt-to-GDP ratio. This will put us in the middle of the pack compared to peer countries. We want to stay in that area.]

Other states are running on debt that's more than the annual value of their economy.

The country's debt stood at ₱7.73 trillion as of December 2019, representing 39.6 percent of the gross domestic product. This climbed to ₱8.6 trillion as of April, which was the first full month of the country grappling with community transmission of the coronavirus.

World Bank senior economist Rong Qian said last week that a 50 percent debt-to-GDP ratio may still be healthy, but governments must also ensure that the money is spent well since it will be eventually paid using taxpayers' money.

RELATED: Dominguez rejects Imee Marcos' proposal to pause foreign debt payments during COVID-19 crisis

The DOF is looking to borrow ₱436.9 billion from foreign sources to support government spending, on top of a ₱300-billion credit line from the Bangko Sentral ng Pilipinas, a ₱119.4-billion bond offering by the Treasury, and other regulatory adjustments meant to free up cash in the local financial markets.

BSP Governor Benjamin Diokno said that the Monetary Board has given three more months for the government to repay the loan to the central bank, extending the initial three-month maturity.

The government has borrowed more than $3 billion (about ₱150 billion) from the World Bank, ADB, and the China-backed Asian Infrastructure Investment Bank to boost COVID-19 response, on top of donations from the private sector.

Lambino said the prudent step also meant keeping the budget deficit around 9 percent of GDP or lower, which seeks to limit the gap between spending and revenues.

The government has also been scrambling to raise more revenues as the economic slump also meant less tax collections.

Apart from going after the unpaid dues of Philippine offshore gaming operators or POGOs and online merchants, Malacañang is also considering the appeal of the gaming regulator to reopen Lotto outlets nationwide as a revenue stream.

Presidential Spokesperson Harry Roque said the matter will be brought up with the Inter-Agency Task Force for the Management of Emerging Infectious Diseases for consideration.