Press Release
March 20, 2006


Senator Manny Villar, Chairman of the Senate Committee on Finance, says that the economy may be picking up and the national debt levels improving, but more reforms need to be done to make the economy more stable over the long term.

Based on recent reports, the country's debt rose by two percent to reach P3.89 trillion last year, 44% of which are foreign debts. However, government debt to gross domestic product (GDP) ratio decreased to 72% last year from 79% in 2004.

"While the debt level is still significantly high, at least the debt-to-GDP ratio has been posting marked improvement. If we can only maintain this, we are on the right track," cites Villar.

Villar adds, "We need to pull ourselves out of the culture of excessive borrowing. For so many years, it has served as a stumbling block or pitfall to the country's economic recovery. A huge chunk of the national budget every year goes straight to paying off interests for foreign debts."

Concerned over the fiscal health of the country, Villar filed Senate Bill 1968 or the Fiscal Responsibility Act that seeks to instill fiscal discipline in the public sector by specifying principles of responsible financial management and promoting full transparency and accountability in government revenue, expenditure and borrowing programs.

Among the salient points of the bill are: reducing the national debt to 60-65% if the Gross Domestic Product (GDP); setting fiscal targets for a three-year period based on an agreement between the executive and legislative branches of the government; repealing of all laws on automatic guarantees of the debts or losses of government-owned and controlled corporations (GOCCs); improve transparency and control measures; control mechanisms on government spending among others.

From 1997 to 2003, about P428.10 billion (21.3%) of the national government debts are due to the assumed liabilities and lending to GOCCs. Furthermore, of the total consolidated public sector debts (CPSD), about 40% accrue to GOCC debts alone. Villar cites on his bill, "To ensure overall macroeconomic stability and long-term sustainable growth the national government should gradually reduce consolidated non-financial public sector debt to 80-90% of GDP by the end of 2010 and reduce national government debt to 60-65% of GDP."

"After 2010 or when the debt targets have been achieved, whichever occurs later, the government shall maintain the same at a sustainable level taking into account the prevailing economic condition as well as changes in the underlying assumptions that may affect the fiscal position of the country," further cites Villar on his bill.

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