PUBLIC

BORROWING

PHILIPPINES GOVERNMENT DEBT TO GDP(1990-2016)

Philippines recorded a Government Debt to GDP of

45.05 percent of the country's Gross Domestic Product
in 2015. Government Debt to GDP in Philippines
averaged 57.34 percent from 1990 until 2015,
reaching an all-time high of 74.90 percent in 1993 and
a record low of 45.05 percent in 2015. Government
Debt to GDP in Philippines is reported by the Bureau
of the Treasury, Philippines.

 Last March 2016 - The National Governments (NG)

outstanding debt stood at P5,900 billion as of endJanuary 2016. The figure reflects a 0.9% or P54.36
billion decrease relative to the end-2015 level due
to the net redemption of domestic government
securities. Year-on-year, total NG debt has climbed
by 2.6% or P148.306 billion.

 Generally, Government debt as a percent of GDP is used

by investors to measure a country ability to make future
payments on its debt, thus affecting the country
borrowing costs and government bond yields. This page
provides - Philippines Government Debt To GDP - actual
values, historical data, forecast, chart, statistics,
economic calendar and news. Philippines Government
Debt to GDP - actual data, historical chart and calendar
of releases - was last updated on March of 2016.

TYPES OF PUBLIC
DEBT

PRODUCTIVE AND
UNPRODUCTIVE
DEBTS

PRODUCTIVE DEBT
Public debt is said to be productive when it is raised for productive
purposes and is used to add to the productive capacity of the economy.
If the borrowed money is invested in the construction of railways,
irrigation projects, power generations, etc. It adds to the productive capacity
of the economy and also provides a continuous flow of income to the
government. The interest and principal amount is generally paid out of
income earned by the government from these projects.

UNPRODUCTIVE DEBT
Unproductive debts are those which do not add to the productive capacity
of the economy.
The interest and the principal amount may have to be paid from other
sources of revenue, generally from taxation, and therefore, such debts are a
burden on the community.
Public debt used for war, famine relief, social services, etc. is considered as
unproductive debt.

VOLUNTARY AND
COMPULSORY
DEBT

VOLUNTARY DEBT
These loans are provided by the members of the public on voluntary basis.
Most of the loans obtained by the government are voluntary in nature. The
voluntary debt may be obtained in the form of market loans, bonds, etc.
The Government makes an announcement in the media to obtain such loans.
The rate of interest is normally higher than that of compulsory debt, in order
to induce the people to provide loans to the government.

COMPULSORY DEBT
A compulsory debt is a rare phenomenon in modern public finance unless
there are some special circumstances like war or crisis. The rate of interest
on such loans may be low. Considering the compulsion aspect; these loans
are similar to tax, the only difference is that loans are rapid but tax is not.

SHORT-TERM, MEDIUM-TERM & LONG-TERM

DEBTS

SHORT TERM DEBT

Short term debt matures within a duration of 3 to 9 months. Generally, rate
of interest is low. For instance, in India, Treasury Bills of 91 days and 182
days are examples of short term debts incurred to cover temporary
shortages of funds. The treasury bills of government of India, which usually
have a maturity period of 90 days, are the best examples of short term
loans. Interest rates are generally low on such loans

LONG TERM DEBT

Long term debt has a maturity period of ten years or more. Generally the
rate of interest is high. Such loans are raised for developmental
programmes and to meet other long term needs of public authorities.

MEDIUM TERM DEBT

The Government may borrow funds for medium term needs. These funds
can be used for development and non development activities. The period of
medium term debt is normally for a period above one year and up to 5
years. One of the main forms of medium term debt is by way of market
loans.

FUNDED AND UNFUNDED DEBTS

FUNDED DEBT
Funded debt is repayable after a long period of time. The period may be 30
years or more. Funded debt has an obligation to pay fixed sum of interest
subject to an option to the government to repay the principal. The
government may repay it even before the maturity if market conditions are
favorable. Funded debt is Undertaken for meeting more permanent needs,
say building up economic & industrial infrastructure. The government
usually establishes a separate fund to repay this debt. Money is credited by
the government into this fund & debt is repaid on maturity out of this fund.

UNFUNDED DEBT
Unfunded debts are incurred to meet temporary needs of the governments.
In such debts duration is comparatively short say a year. The rate of
interest on unfunded debt is very low. Unfunded debt has an obligation to
pay at due date with interest.

REASONS FOR
BORROWING

 DEFICIT BUDGET
WAR
CALAMITIES
ECONOMIC DEVELOPMENT
HELP PUBLIC ENTERPRISES
CHECK ECONOMIC STABILITY

EXPENDITURE

TAXATION

EXPENSE > INCOME

In 2010, the Philippine Government spent

a total of 1.5 trillion and earned a total
of 1.2 trillion from tax and non-tax
revenues, thus resulting to a total deficit
of 314.5 billion.

Aside from Tax and Non-Tax Revenues, the

government makes use of other sources of
financing to support its expenses. In 2010, the
government borrowed a total net of 351.646
billion for financing:

DEBT FINANCING

DEBT AND FINANCING

Debt- Debt is an amount of money borrowed by one
party from another.
Financing- is the act of providing funds forbusiness
activities, making purchases orinvesting.

DEBT FINANCING
Debt financing is when a firm raises money forworking capitalorcapital
expendituresby selling bonds, bills, or notes to individual
and/orinstitutional investors. In return for lending the money, the
individuals or institutions become creditors and receive a promise that the
principal and interest on the debt will be repaid.
The governments revenue streams from taxation and its activities may not
coincide, and this mismatch may be financed by borrowing first in the
financial market and then paying when the tax revenues collected are
enough to cover the debts.
It is the use of borrowed funds to finance the government expenditures.

CONCEPT OF DEBT FINANCING

Those who lend funds to the government for the purpose of
financing government expenditures usually do so under their
own free will.
In return for the funds they lend to the government, they
receive a bond, or some other note of government
indebtedness, that embodies the promise of the government to
repay the loan with interest at some future date.

SOURCES OF
DEBT FINANCING

EXTERNAL
SOURCES

PROGRAM AND PROJECT LOANS

The government offers projects loans to external
bodies and uses the proceeds to fund domestic
projects like infrastructure, agriculture and other
government projects.

ZERO-COUPON TREASURY BILLS

This type of bond doesnt pay interest at all during the term of
the bond, but the bondholder collects the entire principal plus
interest when the bond matures.
The investor gets the par value at maturity date, but with no
interest.
Instead of interest payment at the end of the term, the bond sells
lower than its par value.
The investor will profit by the difference between the purchase
price (which is discounted) and the par value which you will get
when the bond matures.

GLOBAL BONDS
Global bonds are issued in different currencies and distributed in
the currency of the country where it is issued.
For example, a global bond issued in the Philippines will be in
Peso (PhP), while a global bond issued in the Netherlands will be
in euros.
Bonds are loaned in terms of years; for example, a three-year
PhP2 billion Peso global loan will be paid back by the country it is
loaned to within three years at face value plus the interest rate.

THE REPUBLIC OF THE PHILIPPINES ISSUES ITS

FIRST PESO-DENOMINATED GLOBAL BONDS
SEPTEMBER 9, 2010
The Republic of the Philippines (the Republic) embarked on a
breakthrough transaction in the international capital markets with
its offering of PHP44.109 billion (equivalent to US$1.0 billion) 10year Philippine Peso Global Bonds.
The newly issued bonds, which were priced at 99.607% with a
coupon of 4.95% and a yield of 5.0%, will mature in January
2021.
The Peso Global Bond is expected to enhance the governments
debt investor profile while paving the way for greater

DOMESTIC
SOURCES

TREASURY BONDS

FACILITY LOANS

TREASURY BILLS
Difference sa zero coupon treasury bills
Difference sa treasury bonds

BOND EXCHANGES

PROMISSORY NOTES

TERM DEPOSITS