Economic slowdown forces Phl in debt
The slowdown of economic activity, combined with increased expenditure payout, has forced governments, including the Philippines, to borrow from domestic and foreign sources raising their debt levels.
“Domestically, a plan for fiscal consolidation to improve the debt situation needs three key factors — continuous growth, balance in managing the effort to reduce fiscal deficits without undermining the recovery and sustaining the program to bring down debt ratios which can take years,” Amando Tetangco Jr., former governor of the Bangko Sentral ng Pilipinas said during the Bankers Association of the Philippines CEO Forum 2022 recently.
According to him, clearly communicated medium-term plans based on specific measures and backed by solid fiscal frameworks are keys to establishing credit credibility.
The national government’s total outstanding debt reached P12.76 trillion as of end-April 2022, equivalent to 63.5 percent of gross domestic product, data from the Bureau of Treasury showed. Of the total debt stock, 30 percent was sourced externally, while 70 percent were domestic borrowings.
On the banking system, Tetangco said that earlier reforms allowed banks to enter the pandemic in a position of strength and helped the system absorb the headwinds while remaining sound and robust. In fact, banks’ capital adequacy and liquidity ratios have improved, Tetangco said.
“The sound financial system enabled the effective intermediation of funds to productive sectors as outstanding loans quickly recovered after a brief period of contraction,” he said.
“Nevertheless, challenges remain, and banks need to be resilient, more technologically advanced, more sustainable, and inclusive than ever before,” the banker added.
Tetangco concluded that in addressing the complex nature of the risks that continue to confront us, a whole-of-government approach that calls for greater coordination of fiscal, monetary, and financial policies is needed.
Read more Daily Tribune stories at: https://tribune.net.ph/
Follow us on social media