Chapter 6: Public
Debt Management
Yosef Eric C. Hipolito, BA, LPT
Grade 10 Curriculum chairman, SJS
MAEd
Presentation overview:
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Theory of Public Debt
Structure of Philippine Public Debt
Organization for Philippine Expenditure
Patterns of governmental expenditures
Public debt: issues and problems
Sources of our nation’s fund and
resources:
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Taxes
Selling of government’s properties
Payments for IDs and certifications
Penalties
GOCCs
DEBT
Public Debt Management
• Process of establishing and executing a
strategy for managing the government’s
debt in order to:
- achieve its risk and cost objectives
- raise the required amount of funding
Why is it important?
• Poorly structured debt is a factor in
inducing or propagating economic crises
in many countries throughout history.
- to meet budgetary deficit
- to finance war
- to provide foreign exchange
- to check recession
THEORY OF PUBLIC
DEBT
1. Classical Theory of Public
Debt
• Formed during 18th century (Age of
Mercantilism) until 19th century (Age of
Capitalism)
• Theory that believes in the
essence of “LaissezFaire” policy
• Theory that has a pessimistic point of view.
• Its supporters believe that government
borrowing is invariably wasteful, ruinous to
prosperity, and even morally unjust.
2. Neo-Classical Theory of Public
Debt
• Extension of Classical Theory (later part of
19th century)
• Formed by A.C. Pigou through his book
“Economics is Welfare”
• This theory believes that the economic
system functions in response to the
instructions of the market the ultimately
the consumer.
3. Keynesion Theory of Public Debt
• “Modern Theory of Public Debt”
• Theory that states that the increase in
public debt through the multiple effects
would raise the National Income.
• Government should control the
economy
• Formed after the “Great
Depression in 1930”
STRUCTURE OF
PHILIPPINE PUBLIC
DEBT
Four stages of Public Debt
according to Angel Yoingco:
1. Borrowing the funds
2. Spending the funds
3. Raising revenue for payments
4. Actual debt repayment
Classification of Public Debt
according to:
• Sources (Foreign and Domestic)
• Category (Direct, Guaranteed and Nonguaranteed)
• Maturity (Short term, Medium term and
Long term)
1. SOURCES: Philippine Domestic
Debt and Philippine Foreign Debt
• Domestic Debt (Internal)- owed to lenders
within the country.
Examples: BSP Loans; Treasury securities
• Foreign Debt (External)- owes to foreign
creditors, complemented by internal debt
owed to domestic lenders.
Examples: IMF Loans; WB Loans
Domestic and Foreign Debt
As of April 2018 (2nd Quarter of the year)
Philippine General Debt- P70.34 Billion
• Domestic Debt- P33.08 Billion
• Foreign Debt- P37.26 Billion
Source: Bureau of Treasury (BTr)
Domestic Debt
(Internal)
Foreign Debt
(External)
2. CATEGORY: Direct, Guaranteed
and Non-guaranteed
• Direct- made directly from lender to
borrower, rather than a third party
(National and Local)
• Guaranteed- promise by a one party to
assume the debt obligation of a borrower
• Non-guaranteed- not guaranteed for
repayment by a public entity because it is
payable solely from pledged specific for
earnings of revenue (utilities, sewage
disposal plants, toll bridges, etc.)
3. MATURITY: Short term, Medium
term and Long term
• Short term- (current liabilities) any
financial obligation that is either due
within a 12-month period or due within
the current fiscal year
• Medium term- type of fixed income
security with a maturity, or date of
principal repayment, that is set to occur in
two to 10 years
• Long term- any liabilities to be paid
within 11 years and above
Misconceptions about Philippine
debt history:
• Martial Law was a “Golden
Age of Phil. Economy”
• P1=$1
• Marcos’s declaration as
“Philippines will be great
again.”
“Our misfortunes are our own fault, let us blame nobody
else for them. But as long as the Filipino people do not
have sufficient vigour to proclaim, head held high and
chest bared, their right to a life their own in human society
and to guarantee it with their sacrifices, with their very
blood if necessary. Why give them independence? What is
the use of independence if the slaves of today, will become
the tyrants of tomorrow? And no doubt they will, because
whoever submits to tyranny, loves it!”
-Padre Florentino (El Filibusterismo, 1891)
References:
PUBLIC FISCAL ADMINISTRATION (PUBLIC BORROWING)
https://www.slideshare.net/KarenAlanSamonte/public-debt-philippines
SHORT, MEDIUM AND LONG TERM DEBT
https://www.investopedia.com/terms/i/intermediatetermdebt.asp
THEORETICAL ASPECTS OF PUBLIC DEBT.
http://shodhganga.inflibnet.ac.in/bitstream/10603/147237/8/08%20theoreti
cal%20aspects%20of%20public%20debt.pdf
Thank you!
Yosef Eric C. Hipolito, BA,
LPT
Grade 10 Curriculum chairman, SJS
Master of Arts in Education- Educational
Management