Government seeks to reduce its debt-to-GDP ratio

MANILA, Philippines – The Aquino administration aims to lower the government’s debt-to-gross domestic product (GDP) ratio to 53 percent by 2013 from the projected 58 percent ratio this year.

At this level, the government’s budget deficit is projected to hit P206.4 billion or two percent of GDP, a marked improvement from the projected P325 billion deficit this year which is equivalent to 3.9 percent of the economy’s total economic output.

Finance Undersecretary Gil Beltran said that while the Aquino administration chose not to adopt the previous administration’s plan to balance the budget by 2013, it expects a significant reduction in the country’s debt-to-GDP ratio, which is closely watched by global investors.

“Even if the budget deficit is there, if you compute the debt to GDP ratio, you will see that it is going down,” said Beltran.

Further down the road, the Aquino administration expects debt-to-GDP ratio to drop to 47 percent by 2016.

Finance officials said the 2013 projections take into account the combined effects of higher economic growth and a sustained improvement in revenues.

“It will be a combination of both higher economic growth and higher revenues,” Beltran said.

The previous administration had previously planned to improve the debt-to-GDP ratio to 55.7 percent in 2009 and to 53.4 percent in 2010 but this program has been shelved as the country battled with the worldwide economic crisis.

The National Government’s debt stock in 2010 is now expected to climb to P4.833 trillion or P110 billion above the previous estimate of P4.723 trillion because of the expected increase in the budget deficit for the year, latest estimates from the Department of Finance showed.

The Aquino administration is racing against time to contain a widening budget deficit by improving tax administration. It earlier vowed that it would only slap new taxes as a last resort in raising revenues.

Instead, it committed to first address tax leaks such as smuggling and corruption. –Iris C. Gonzales (The Philippine Star)