Finance Secretary Benjamin Diokno said Thursday the government debt remains at a manageable level despite rising to a record level of P12.79 trillion as of end-June, or equivalent to 62.1 percent of the gross domestic product.
Diokno issued the statement in response to Senate committee on ways and means chairman Sherwin Gatchalian’s concern that the Philippines might follow Sri Lanka in defaulting on its debt and declaring itself bankrupt.
Diokno assured senators the national debt remained within manageable levels, allaying fears about the country defaulting on loans amid a slightly elevated debt-to-gross domestic product ratio.
“I can assure you… that we won’t go the Sri Lanka way. We’re very careful with our borrowings. In fact, as [Treasurer Rosalia De Leon] said, I think most of our debt is long term. [Former Finance Secretary Carlos Domniguez] has been very good in making sure that we borrow at the lowest possible interest rate and it’s spread out,” Diokno said in a briefing before the Senate committee.
The government’s Medium-Term Fiscal Framework aims to bring down the debt-to-GDP ratio to less than 60 percent by 2025 and reduce the deficit-to-GDP ratio from 6.5 percent to 3.0 percent by 2028.
“The implication is clear: we do not have to borrow as much as we did during the crisis years,” Diokno said.
De Leon said in the same briefing the government’s prudent debt management strategy enabled the country to safeguard its sovereign ratings amid a sea of downgrades.
Diokno earlier expressed confidence that there would be no downgrades in the country’s credit rating, as the Marcos administration crafted a comprehensive economic plan to boost investor confidence and ensure accelerated recovery.
He said rating agencies affirmed the country’s investment grade rating despite the pandemic, while downgrading nearly one-third of the emerging economies and even some developed countries.
Diokno told senators that the enhanced tax system instituted by the Duterte administration would ensure that the government would meet its obligations.
“I think, what you’ve done, because you have strengthened the tax system, I think we should be able to service whatever we borrowed down the road,” he said. Julito G. Rada
The MTFF proposes measures that aims to further improve tax administration and enhance the fairness and efficiency of the tax system.
“I can assure Mr. Chairman and members of the committee that in fact that is the purpose of the Medium-Term Fiscal Framework—to make sure that we don’t go the Sri Lanka way,” Diokno said.