CHALLENGES ON DEBT

MANAGEMENT IN DEVELOPING
COUNTRIES
Roberto B. Tan
Treasurer
Republic of the Philippines
March 2011
 DEBT MANAGEMENT
OBJECTIVES
1 Reduce Debt Load (Medium-term)

Ensure government financing is

2 met at minimum cost within an
acceptable level of risk

3 Minimize Foreign Exchange Risk

1.Reduce Debt Load (Medium-term)

Quantitative Target – 55% by 2011 to 43%

by 2016

How do we achieve this target?

 Sustain high growth path
 Enhanced long-term revenue generation
 Lower budget deficit
Sustain High Growth Path

Medium Term GDP Projection

 Increasing Revenue Collection and
Lowering the Deficit
25
21.6
20.8
20.0
18.8 18.9 19.1 19.6
20 18.5 18.1 18.8
18.0
16.3 17.1 18.1
15.6 17.3
14.6 14.2 16.4
15 15.6
14.8
14.1
12.8 12.8

10

5 3.9 3.9
3.2
2.6
2.0 2.0 2.0 2.0

0
2009 A ctual 2010 2011 2012 2013 2014 2015 2016

R evenues E xpenditures D eficit Tax E ffort

2. Ensure government financing is
met at minimum cost within an
acceptable level of risk

 Improve the External and Domestic Yield

Curves
 Strategically accessing foreign debt
markets
 Maximize utilization of Official
Development Assistance (ODA) funds
A more efficient ROP Yield Curve

200
8

200
9
201
0

201
1
 Where we are now: Philippine Ratings
History

BB+ Non-Investment Grade

BB BB Speculative
BB- BB- BB

Standard and Poor’s currently rates the sovereign 2 steps

below investment grade at BB, which is a recent update
from its previous BB- rating.
Historical Domestic Yield Curves

200
0

200
5

201
0

2011 (as of March

2011)
ROP’s Domestic Debt Profile
Historical Domestic Average Maturity
 Other reforms moving forward

Develop market making system

 Unify taxable and tax-exempt markets

Develop market-making mechanism

Improve access of retail investors to market

information and purchase of government securities
3. Minimize Foreign Exchange Risk

 Controllable macroeconomic measures

 Effective inflation management
 Healthy reserves
 Increase reliance to the domestic market
 Issue local currency denominated global
bonds
 Diversify international currency
borrowings
Effective Inflation Management
Growing Healthy Reserves
Increasing reliance to the domestic
market
Thank you