1. Public Fiscal Administration
Public Borrowing

2. Theory of Public Debt
What is Public Debt?
money or credit owed by any level of government
indirect debt of taxpayers
INTERNAL DEBT
EXTERNAL DEBT

3. Theory of Public Debt
What are the origins of Public Borrowing?
European economists between 1500 and 1750
Mercantilist Period are considered mercantilists.
Era of merchant capital, dependent on
connections between social and productive
systems
One of the greatest critics of
mercantilism. He was strong in
emphasizing the disadvantages of
Adam Smith borrowing and expostulated on the
advantages of the balanced budget
during the years of capitalism.

4. Theory of Public Debt
Keynesian Theory
of Deficit Financing
It was during the time of John Maynard Keynes that
the idea of public borrowing was introduced during
the Great Depression, mainly as a compensatory tool
in times of economic stability.
“In order to keep people fully
employed, governments have to run deficits
when the economy is slowing.”
Borrowing for capital generation purposes is
necessary like setting up public enterprises
which will contribute to a productive output.

5. Theory of Public Debt
Keynesian Theory
of Deficit Financing
WHY IT CANNOT WORK IN LDC’S
1) Instabilities of LDC‟s are of external origin like oil crisis, inflation, and
recession in the industrialized countries.
2) Keynes‟ theories are based on the assumption of fully developed
economies undergoing cyclical difficulties. In LDC‟s productive
capacity is not yet fully developed.
3) An example cited by fiscal administrators in the 60‟s was the
Emergency Employment Administration during the Macapagal era where
deficit financing was resorted to.

6. Theory of Public Debt
What are the origins of Public Borrowing?
Development Finance
Predicated on Foreign Borrowing.
The expenditure demands of development are
expensive and urgent. The only immediate
option recommended by experts is
borrowing, specifically foreign borrowing.
Musgrave and Musgrave point out that in development finance, foreign
borrowing is preferable.
“Public investment which is financed by (local) borrowing does not
add to capital formation if it merely diverts funds otherwise available
for private investment. If borrowing is from abroad, additional
resources become available as borrowing is accompanied by
increased imports.”

7. Theory of Public Debt
What are the origins of Public Borrowing?
Development Finance
Why Foreign Borrowing is preferred:
1. results in inflow of additional resources
2. covers up foreign exchange deficiencies due to
development spending
3. facilitates the inflow of technical and managerial
expertise
Significant events during the development decades:
1. the sharp rise in borrowing activities of the LDCs
2. the emergence of the World Bank and
International Monetary Fund as the dominant
figures in development

8. Theory of Public Debt
What are the origins of Public Borrowing?
Development Finance
International
Monetary Fund
An international organization of
Surveillance
184 member countries. It was
1)Abolition or liberalization of
established to promote foreign exchange and import
international monetary controls
Financing
cooperation, exchange 2)Devaluation of the exchange
stability, and orderly exchange rate
arrangements; to foster 3)Domestic anti-inflationary
economic growth and high levels programmes
Technical Assistance provide
of employment; and to 4)Greater hospitality to foreign
temporary financial assistance to
investment
countries to help ease balance of
payments adjustment.

9. Theory of Public Debt
What are the origins of Public Borrowing?
Development Finance
The World Bank
By 1949, the bank shifted
Originated from IBRD
from reconstruction to
(International Bank of
development lending, with
Reconstruction and
focus on LDC‟s.
Development)
During the 1950‟s, loans to
the goal was to assist in the LDC‟s were infrastructure
recovery and reconstruction of related. Later on, it widened its
countries devastated by WWII. scope to include
By the end of the 90‟s, total loans and
By the end of 1980, total loans and credits mining, agriculture, water, educ
credits to amounted to $80 billion.
to LDC‟s LDC‟s amounted to $2 trillion. ation, etc.

10. Theory of Public Debt
What are the origins of Public Borrowing?
The International
Structuralist Models
Dependency Theory/
Theory of Imperialism/ Neo-Marxist
Neo-colonialism
Dos Santos defines dependence as a
Views the relationships conditioning situation where the economies of
one group of countries are conditioned by the
among LDC‟s, advanced
development and expansion of others
countries, and the WB-IMF as
that of an imperialism. Conditions of dependency:common historical
background; initial dependence on imports for
The colonial relationship is manufacturing requirements; heavy dependence on
evident through political and imports of foreign technology; deep penetration by
economic dominance, or foreign capital in the guise of transnational
what is called „neo-colonial‟. corporations; condition of
cultural, psychological, social, and political
independence.

11. Theory of Public Debt
What are the origins of Public Borrowing?
The International
Structuralist Models
Cheryl Payer, writer of the
“Debt Trap”, cited that “the The Philippines in the early 80s was one of
World Bank has used its the top seven debtor countries and had a
financial power to promote Balance of Payment (BOP) deficit of $1.135
the interests of billion, a trade deficit of $2.805 billion, and a
private, international capital cash deficit of P14.4 billion.
in its expansion to every Negotiations with IMF were formidable, such
corner of the as, reduction of cash deficit to P9
„underdeveloped‟ world.” billion, further restructuring of tariff rates
and further devaluation of the peso.

12. Structure of Philippine Public
Debt
CROSS-
SECTION
Creditor Debtor Maturity
Medium-Term
Official Private Public Central Bank Private Short-term
Long-Term
Multilateral Banks
Bilateral Suppliers credit
Financial
Institutions
Others

13. Structure of Philippine Public
Debt
TIME-SERIES ANALYSIS
external debt accumulation in the Philippines is
Growth Trend characterized by an accelerating trend.
public sector which includes mainly the National
Debtor trend Government, GOCCs, and the Central Bank; and the
private sector.
Philippine major creditors-private commercial
Creditor trend banks, financial institutions, and the official creditors
consisting of multilateral and bilateral agencies.
Debt-service interest payments alone on debts had
trend continually risen.
Net Resource measures the net flow of resources in a
Transfer debtor-creditor relationship.

14. NG DEBT
NG Debt Nominal GDP NG Debt
YEAR (Pm) current PHP to GDP
1990 600,205 1,077,237 55.72%
1991 672,788 1,248,011 53.91%
1992 870,814 1,351,559 64.43%
1993 1,125,892 1,474,457 76.36%
1994 1,081,155 1,692,932 63.86%
1995 1,158,622 1,905,951 60.79%
1996 1,155,237 2,171,922 53.19%
1997 1,350,574 2,426,743 55.65%
1998 1,496,221 2,665,060 56.14%
1999 1,775,356 2,976,905 59.64%
2000 2,166,710 3,354,727 64.59%
2001 2,384,917 3,631,474 65.67%
2002 2,815,468 3,963,873 71.03%
2003 3,355,108 4,316,402 77.73%
2004 3,811,954 4,871,555 78.25%
2005 3,888,231 5,444,039 71.42%
2006 3,851,506 6,032,835 63.84%
2007 3,712,487 6,648,245 55.84%
2008 4,220,903 7,497,535 56.30%
Jun-09 4,227,107 7,537,612 56.08% 14

15. NG FOREIGN DEBT
Foreign Nominal GDP Foreign
YEAR (Pm) current PHP to GDP Ratio
1990 299,764 1,077,237 27.83%
1991 334,898 1,248,011 26.83%
1992 372,897 1,351,559 27.59%
1993 449,025 1,474,457 30.45%
1994 416,177 1,692,932 24.58%
1995 440,227 1,905,951 23.10%
1996 413,180 2,171,922 19.02%
1997 600,966 2,426,743 24.76%
1998 645,290 2,665,060 24.21%
1999 796,952 2,976,905 26.77%
2000 1,098,510 3,354,727 32.75%
2001 1,137,234 3,631,474 31.32%
2002 1,344,266 3,963,873 33.91%
2003 1,651,327 4,316,402 38.26%
2004 1,810,734 4,871,555 37.17%
2005 1,723,938 5,444,039 31.67%
2006 1,697,428 6,032,835 28.14%
2007 1,511,320 6,648,245 22.73%
2008 1,806,475 7,497,535 24.09% 15
Jun-09 1,851,018 7,537,612 24.56%

16. DOMESTIC NG DEBT
Domestic Nominal GDP Domestic
YEAR (Pm) current PHP to GDP Ratio
1990 300,441 1,077,237 27.89%
1991 337,890 1,248,011 27.07%
1992 497,917 1,351,559 36.84%
1993 676,867 1,474,457 45.91%
1994 664,978 1,692,932 39.28%
1995 718,395 1,905,951 37.69%
1996 742,057 2,171,922 34.17%
1997 749,608 2,426,743 30.89%
1998 850,931 2,665,060 31.93%
1999 978,404 2,976,905 32.87%
2000 1,068,200 3,354,727 31.84%
2001 1,247,683 3,631,474 34.36%
2002 1,471,202 3,963,873 37.12%
2003 1,703,781 4,316,402 39.47%
2004 2,001,220 4,871,555 41.08%
2005 2,164,293 5,444,039 39.76%
2006 2,154,078 6,032,835 35.71%
2007 2,201,167 6,648,245 33.11%
2008 2,414,428 7,497,535 32.20% 16
Jun-09 2,376,089 7,537,612 31.52%

17. GOCC DEBT
Domestic Foreign Contingent Contingent
YEAR (Pm) (Pm) Debt (Pm) Debt to GDP
1990 4,422 96,502 100,924 9.37%
1991 4,669 91,012 95,681 7.67%
1992 5,023 100,550 105,573 7.81%
1993 5,207 137,668 142,875 9.69%
1994 5,585 140,732 146,317 8.64%
1995 6,218 160,699 166,917 8.76%
1996 6,229 170,382 176,611 8.13%
1997 7,646 265,780 273,426 11.27%
1998 8,677 295,515 304,192 11.41%
1999 8,320 358,544 366,864 12.32%
2000 12,451 469,647 482,098 14.37%
2001 23,167 472,610 495,777 13.65%
2002 21,065 570,673 591,738 14.93%
2003 22,635 685,904 708,539 16.42%
2004 33,135 800,573 833,708 17.11%
2005 48,183 538,167 586,350 10.77%
2006 72,113 497,814 569,927 9.45%
2007 64,968 419,216 484,184 7.28%
2008 72,905 472,672 545,577 7.28%
Jun-09 89,034 491,473 580,507 7.70% 17

18. Total Public Sector Debt
Public Sector Nominal GDP % of
Year Debt (Pb) (current, Pb) GDP
1998 2,522.5 2,665.1 94.6
1999 3,020.2 2,976.9 101.5
2000 3,623.8 3,354.7 108.0
2001 3,850.2 3,631.5 106.0
2002 4,369.1 3,963.9 110.2
2003 5,074.0 4,316.4 117.6 From 118% in
2003 (due to
2004 5,289.2 4,871.6 108.6 NPC IPP), it has
2005 5,033.9 5,444.0 92.5 fallen to 63%
2006 4,943.6 6,032.8 81.9
2007 4,773.6 6,648.2 71.8
2008p 4,726.3 7,497.5 63.0
2000 to
2008 1,102.5 4,142.8 26.6
2004 to
2008 (562.9) 2,625.9 (21.4)
Source: BSP SEFI as October 28, 2009 18

19. ECONOMIC IMPACT OF FISCAL REFORM
NG Debt Nominal GDP NG Debt
YEAR (Pm) current PHP to GDP
2004 3,811,954 4,871,555 78.25%
2005 3,888,231 5,444,039 71.42%
2006 3,851,506 6,032,835 63.84%
2007 3,712,487 6,648,245 55.84%
2008 4,220,903 7,497,535 56.30%
Jun-09 4,227,107 7,537,612 56.08%
2004-2009 415,153 2,666,057
19

20. National Government Debt Service CY 1995-2008
(in million pesos)
1995 1996 1997 1998 1999 2000 2001 2002
TOTAL DEBT SERVICE 137,175 117,742 125,649 164,509 205,396 227,843 274,439 357,959
Interest Payments 72,658 76,522 77,971 99,792 106,290 140,894 174,834 185,861
Interest Payments as % of GDP 3.81% 3.52% 3.21% 3.74% 3.57% 4.20% 4.81% 4.69%
Domestic 50,805 59,002 58,350 73,525 74,980 93,575 112,592 119,985
Foreign 21,853 17,520 19,621 26,267 31,310 47,319 62,242 65,876
Principal Payments 64,517 41,220 47,678 64,717 99,106 86,949 99,605 172,098
Principal Payments as % of GDP 3.39% 1.90% 1.96% 2.43% 3.33% 2.59% 2.74% 4.34%
Domestic 34,338 13,260 17,865 28,761 61,552 45,429 54,038 80,944
Foreign 30,179 27,960 29,813 35,956 37,554 41,520 45,567 91,154
Debt Service as % of GDP 7.20% 5.42% 5.18% 6.17% 6.90% 6.79% 7.56% 9.03%
Foreign IPs as % of GDP 1.15% 0.81% 0.81% 0.99% 1.05% 1.41% 1.71% 1.66%
Domestic as % of GDP 4.47% 3.33% 3.14% 3.84% 4.59% 4.14% 4.59% 5.07%
Foreign as % of GDP 2.73% 2.09% 2.04% 2.33% 2.31% 2.65% 2.97% 3.96%
Total Domestic 85,143 72,262 76,215 102,286 136,532 139,004 166,630 200,929
Total Foreign 52,032 45,480 49,434 62,223 68,864 88,839 107,809 157,030
GDP Nominal (current ) 1,905,951 2,171,922 2,426,743 2,665,060 2,976,905 3,354,727 3,631,474 3,963,873
20

21. National Government Debt Service CY 1995-2009
(in million pesos)
Fiscal space: Jan-Sep
2003 2004 2005 2006 of GDP
2% 2007 2008 2009*
TOTAL DEBT SERVICE 469,990 601,672 678,951 854,374 614,069 612,682 549,016
Interest Payments 226,408 260,901 299,807 310,108 267,800 272,218 235,283
Interest Payments as % of GDP 5.25% 5.36% 5.51% 5.14% 4.03% 3.63% 3.12%
Domestic 147,565 169,997 190,352 197,263 157,220 170,474 132,635
Foreign 78,843 90,904 109,455 112,845 110,580 101,744 102,648
Principal Payments 243,582 340,771 379,144 544,266 346,269 340,464 313,733
Principal Payments as % of GDP 5.64% 7.00% 6.96% 9.02% 5.21% 4.54% 4.16%
Domestic 147,322 222,405 253,492 380,939 284,017 259,951 226,372
Foreign 96,260 118,366 125,652 163,327 62,252 80,513 87,361
Debt Service as % of GDP 10.89% 12.35% 12.47% 14.16% 9.24% 8.17% 7.28%
Foreign IPs as % of GDP 1.83% 1.87% 2.01% 1.87% 1.66% 1.36% 1.36%
Domestic as % of GDP 6.83% 8.05% 8.15% 9.58% 6.64% 5.74% 4.76%
Foreign as % of GDP 4.06% 4.30% 4.32% 4.58% 2.60% 2.43% 2.52%
Total Domestic 294,887 392,402 443,844 578,202 441,237 430,425 359,007
Total Foreign 175,103 209,270 235,107 276,172 172,832 182,257 190,009
GDP Nominal (current ) 4,316,402 4,871,555 5,444,039 6,032,835 6,648,245 7,497,535 7,537,612
Q22009 per BTr
21

22. FOREIGN DEBT Debt
YEAR Foreign Foreign Debt
(end of period; in $m) to GDP Ratio
1990 28,322 63.91%
1991 29,933 65.91%
1992 30,771 58.09%
1993
If we adjust for 34,687 63.80%
resident ROP
1994 37,351 58.28%
holdings of
1995
US$18bn, forei 37,697 50.86%
1996
gn debt to GDP 39,883 48.14%
1997
would be only 42,972 52.19%
21%1998 46,146 70.81%
1999 50,997 66.96%
2000 51,206 67.46%
2001 51,900 72.88%
2002 53,645 69.84%
2003 57,395 72.07%
2004 54,846 63.09%
2005 54,186 54.83%
2006 53,367 45.39%
2007 54,938 38.13%
2008 53,856 31.95%
Note: 2007 & 2008 data are preliminary 22

23. NG Foreign Bonds: 13x since 1995
Change
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 1995-2008
TOTAL 1,158,622 2,166,710 2,384,917 2,815,468 3,355,108 3,811,954 3,888,231 3,851,506 3,712,487 3,966,069 2,807,447
Domestic Debt 718,395 1,068,200 1,247,683 1,471,202 1,703,781 2,001,220 2,164,293 2,154,078 2,201,167 2,338,569 1,620,174
NG Direct 678,007 1,049,083 1,233,825 1,462,950 1,701,484 1,998,926 2,161,999 2,151,784 2,198,873 2,336,275 1,658,268
Foreign bonds- 73% of
Assumed 40,388 19,117 13,858 8,252 2,297 incremental external 2,294 2,294 -38,094
2,294 2,294 2,294
financing for public sector
Foreign Debt 440,227 1,098,510 1,137,234 1,344,266 1,651,327 1,810,734 1,723,938 1,697,428 1,511,320 1,627,500 1,187,273
NG Direct 342,751 647,468 626,958 705,414 815,942 841,096 703,590 674,454 613,595 679,531 336,780
NG Foreign Bonds 76,144 437,570 498,645 629,037 827,400 963,846 1,017,082 1,021,916 897,653 947,906 871,762
Assumed 21,332 13,472 11,631 9,815 7,985 5,792 3,266 1,058 72 63 -21,269
Bonds/Foreign Debt 17.3% 39.8% 43.8% 46.8% 50.1% 53.2% 59.0% 60.2% 59.4% 58.2% 73.4%
Bonds/Debt 1.8% 20.2% 20.9% 22.3% 24.7% 25.3% 26.2% 26.5% 24.2% 23.9% 31.1%
23
Source: Bureau of Treasury

24. Interest Payments & Debt Service to GDP
Foreign Interest For. Debt
Year Payments to Service to
GDP GDP
1998 7.82
1999 old
8.70
concept
1999 new Debt service
This translates 8.64 savings of
to a net concept $10.1bn
resource 2000 4.2 8.25
savings of
US$4.1bn in 2001 4.1 9.17
2008 to finance
import content 2002 3.4 10.10
of capex 2003 3.2 9.98
needed for
growth! 2004 2.7 8.30
2005 2.8 7.71
2006 2.8 6.88
2007 2.5 5.33
2008 1.9 4.41
24
Source: BSP-SEFI

25. Tensile Strength
300.0 70%
65%
250.0
60%
200.0
55%
50%
150.0 45%
40%
100.0
35%
30%
50.0
25%
0.0 20%
1998 2000 2002 2004 2006 2008 Feb 09 Apr 09 Jun 09 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jun
09
NPLs Total Loans to GDP Ratio
18.0 1.00
16.0 0.95
14.0
0.90
12.0
0.85
10.0
0.80
8.0
0.75
6.0
0.70
4.0
2.0 0.65
0.0 0.60
Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma Se Ma
1998 2000 2002 2004 2006 2008 Feb 09 Apr 09 Jun 09
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NPL to Total Loans Ratio Loans to Deposit Ratio
Source: BSP
25

26. Monetary Policy- mostly
countercyclical
8.50 8.5%
8.00
7.50 7.5%
7.00
6.50 6.5%
6.00
5.50 5.5%
5.00
4.50 4.5%
4.00
3.50 3.5%
Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep
2003 2004 2005 2006 2007 2008
RRP GDP Growth Rate
Source: BSP and NSCB 26

27. Huge IRD
27

28. System for Public Debt Management
Background on Public Debt
This desire to borrow in order to spend
Fiscal deficits (the gap between more is usually justified by the
government revenues and total following:
expenditures) are prerequisites to 1) development finance
accumulating debt. 2) cheap credit
The gap represents the difference 3) financing current expenditure
between government revenue
generation and the desired level of
spending of government . Ways on financing expenditure gaps:
The absence of money to fully 1) raising taxes
finance its desired spending prompts 2) tapping domestic savings
a government to borrow. 3) monetary expansion
4) foreign borrowing

29. System for Public Debt Management
Four Stages of Public Debt (Angel Yoingco)
Borrowing the Funds
Spending the Funds
Raising revenue for
repayments
Actual debt repayment

30. System for Public Debt Management
What is Public Debt Management and Why is it Important?
It is the process of establishing and Governments should ensure that both the
executing a strategy for managing level and rate of growth in their public
the government's debt in order to: debt is fundamentally sustainable, and
-raise the required amount of funding can be serviced under a wide range of
-achieve its risk and cost objectives circumstances while meeting cost and
-meet any other sovereign debt risk objectives.
management goals the government
may have set
Poorly structured debt in terms of
maturity, currency, or interest rate
composition and large and unfunded
contingent liabilities have been
important factors in inducing or
propagating economic crises in many
countries throughout history.

31. System for Public Debt Management
What is Public Debt Management and Why is it Important?
Sound debt structures help Several debt market crises have
governments reduce their highlighted the importance of
exposure to interest rate, currency sound debt management
and other risks. practices and the need for an
efficient and sound capital
market.
Risky debt structures are often the
consequence of inappropriate
economic policies--fiscal, monetary
and exchange rate--but the feedback
effects undoubtedly go in both
directions.

32. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
DEBT MANAGEMENT
FROM A MACRO PERSPECTIVE
 Identification of priority areas for foreign
financing
 Determination of project viability and
borrower’s capacity to pay
 Assessment of country’s debt servicing
capability
Bangko Sentral ng Pilipinas

33. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
INSTITUTIONAL ARRANGEMENTS
FOR DEBT MANAGEMENT
 Bangko Sentral ng Pilipinas
 Department of Finance
 Investment Coordination Committee
 Inter-agency Committee for Review of Foreign
Loan Documents
 National Economic Development Authority
 Development Budget Coordination Committee
 Board of Investments
Bangko Sentral ng Pilipinas

34. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
LEGAL BASES
 The Philippine Constitution – 15 October 1986
 Letter of Instructions No. 158 – 21 January 1974
 Foreign Borrowings Act (Republic Act 4860)
– 8 September 1966
 New Central Bank Act (Republic Act 7653)
– 10 June 1993
Bangko Sentral ng Pilipinas

35. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
BSP DEBT MANAGEMENT
RESPONSIBILITIES
 Monitoring the level of external debt
 Keeping outstanding debt and debt burden
at manageable levels
 Obtaining the best available terms and conditions
for foreign financing and avoid bunching of
maturities
Bangko Sentral ng Pilipinas

36. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
BSP DEBT MANAGEMENT TOOLS
 Regulatory issuances (policies and procedures)
 Administrative mechanisms (approval and
registration process; reporting system)
 Observance of ceilings on new commercial MLT
loans and outstanding ST public sector debt
 Debt Strategies
Bangko Sentral ng Pilipinas

37. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
DEBT MONITORING SYSTEM
 The Philippine external debt monitoring system covers
all data categories such as:
 by borrower
(public, private, bank and non-bank);
 by original and residual maturity
(short-term, medium- and long-term);
 by creditor type;
 by currency; and
 by country
Bangko Sentral ng Pilipinas

38. EXTERNAL DEBT MANAGEMENT
IN THE PHILIPPINES
DEBT MONITORING SYSTEM
 The Philippine external debt monitoring system covers
all data categories such as:
 by borrower
(public, private, bank and non-bank);
 by original and residual maturity
(short-term, medium- and long-term);
 by creditor type;
 by currency; and
 by country
Bangko Sentral ng Pilipinas

39. Issues and Problems
• Aquino inherited a government with a budget deficit of
P298.5 billion in 2009 or 3.9 percent of gross
domestic product (GDP). For 2010, the government
has set a fiscal deficit of P300 billion or 3.6 percent of
GDP. Actual collection in January to June 2010
indicates that tax revenues will likely fall short of
target by P74 billion (about 0.9 percent of the GDP
while non-tax revenues will likely fall short of target by
0.4 percent of GDP, according to Dr. Rosario
Manasan, fiscal expert of the Philippine Institute for
Development Studies.

40. The current fiscal situation
 The Arroyo government almost achieved a balanced
budget in 2007, which is on track with its Medium-Term
Philippine Development Plan target. Congress passed
landmark laws like value-added tax, excise tax and lateral
attrition to increase revenue collection. But it fell through
with the onset of the global crisis in the latter part of 2008
and early part of 2009.
 As percent of gross domestic product (GDP), fiscal deficit
surged from less than 1 percent in 2007 and 2008 to 3.9
percent of GDP in 2009.
 As the fiscal deficit soared, so is the national government
debt. Debt-to-GDP ratio went up from 56 percent of GDP
in 2007 to 57 percent of GDP in 2008 and 2009. Although
compared to the 78-percent debt-to-GDP ration in 2004
when the country had a fiscal crisis, the 57-percent debt-
to-GDP ratio is still much lower.

41. The current fiscal situation ..
 The Arroyo government’s economic team proposed to
the Aquino administration to balance the budget within
three to six years but it was received thumbs
down. According to the new Department of Finance
Cesar Purisima, the Aquino government does not
intend to balance the budget in the next six years as
President Aquino intends to focus on social services
during his term.
 But according to DOF Undersecretary Gil
Beltran, delaying the date of achieving a balanced
budget may negatively affect the country’s
creditworthiness. On the other hand, he said that
pushing to wipe out the budget deficit ahead of the
2013 goal may also be too much for the country’s
fragile fiscal position.

42. The current fiscal situation ..
 For 2010, debt-to-GDP is projected to go down to
53.4 percent to 46 percent in 2013. The year 2013
will be a good time to the budget but a more
realistic will be 2015.
 The Development Budget Coordination Committee
(DBCC), the interagency committee that advises
the President on macroeconomic targets, increased
the budget deficit target this year to P325 billion or
3.9 percent of GDP instead of P293 billion or 3.5
percent of GDP. The DBCC is composed of the
Department of Budget and Management, National
Economic and Development Authority, Department
of Finance and Bangko Sentral ng Pilipinas.

43. Thank
you…