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THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINES 
First Regular Session 
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Introduced by Senator Franklin M. Drilon 
EXPLANATORY NOTE 
Debt may be defined as the current use of future revenue. Viewed from 
this perspectivek every government must be more prudent and discerning in 
committing future revenues to pay for its current expenditures. 
National Government debt has more than doubled from P1.33 trillion in 
1996 to P2.88 trillion in 2001. Conservatively, NG debt could reach P3.20 trillion 
by 2003. (An Analysis of the Presideent's Budget for FY2003, CfBO, ffouse of 
Representatives, p. 19) 
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Moreover, the escalating debt service payments in the General 
Appropriations Act causes alarm for it has effectively crowded out expenditures 
for social services and physical infrastructures. 
Debt service payments in absolute amount and as a percentage of the 
total budget has increased dramatically starting in 1998 after steadily declining 
from 1992 to 1997. 
From P78.0 Billion or 15.g0/~ of expenditures in 1997, 
interest payments increased to PI75 Billion or 24.6% in 2001. 
For 2003, an 
amount of P223.2 Billion or 28.5% is allocated for interest expense. (An Analysis 
of the President's Budget for FY 2003, CPBO, House of Representatives, p.20) 
Because of mandatory interest payments, there is little room for 
expenditures in the national budget for urgent social and physical infrastructures 
needed to stimulate the economy. 
There is therefore urgent need for the development of a formal debt 
policy to establish a threshold level for public debt. The setting and imposition 
of a debt cap ensures that debt service payments continues to be affordable 
within the context of budget priorities. 
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In view of the foregoing, approval of this bill is strongly recommended. 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
First Regular Session 
RO :39 
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Introduced by Senator Franklin M. Drilon 
AN ACT 
PROVIDING FOR A CAP ON PUBLIC DEBT TO ENSURE 
LONG-TERM FINANCIAL SUSTAINABILITY THROUGH 
FISCAL DISCIPLINE 
Be it enacted by the Senate and House of Representatives of the 
Philppines in Congress assembled: 
SECTION 1. Title. - This Act shall be known as the "Debt Cap Act". 
SECTION 2. Declaration of Policy. - It is hereby declared a policy of the 
State to adopt fiscal discipline in all areas of government operations. As such, 
government shall endeavor at all times to live within its means by minimizing 
deficit spending to levels that will ensure fiscal sustainability. 
In so doing, 
government debt shall be maintained within levels that will balance the interests 
of present and future generations and will preserve the ability of government to 
access future resources at reasonable terms. 
SECTION 3. Definition of Terms. -When used in this Act: 
a) "Debt" or "Indebtedness" refers to funds from repayable sources 
including loans secured by the government from financial institutions 
and other sources, 
whether internal or external to finance 
development projects a nd/o r budget support . 
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b) "Gross 
Domestic Product" 
refers to the standard economic 
measurement of the size of the economy. It is the total value of the 
production of goods and services within the country. Nominal GDP 
refers to the value of the Gross Domestic Product in current pesos. 
c) "Government - Owned and/or Controlled Corporation" refers to any 
agency organized as a stock or non-stock corporation, vested with 
functions relating to public needs whether government or proprietary 
in nature, and owned by the government directly or through its 
instruments either wholly, or where applicable as in the case of stock 
corporations, to the extent of at least fifty-one (51) percent of its 
capital stock. 


“National Government” refers to the entire machinery of the central 
government, :as distinguished from the different forms of local 
governments. 
SECTION 4. Debt Cap, - Within five (5) years from the enactment of 
this Act, the consolidated outstanding debt of the National Government and of 
government-owned andlor controlled corporations shall not exceed, at any one 
time, an amount equivalent to One Hundred percent (100%) of the country‘s 
nominal Gross Domestic Product. Within another five years and thereafter, said 
outstanding debt shall not exceed Eighty percent (80%) of the country‘s Gross 
Domestic Product: Provided, That in no case within this second five year period 
will the level of outstanding debt exceed One Hundred percent (100%) of Gross 
Domestic Product. 
SECTION 5. €xteptions to Debt Cap. - The following indebtedness shall 
be deemed excluded from the computation of total amount of indebtedness 
subject to the debt cap: 
Loans and other forms of indebtedness incurred by the Bangko Sentral 
ng Pilipinas, the Central Bank Board of Liquidators, government 
financial institutions and government-owned 
and/or controlled 
corporation performing relating financial intermediation operations; 
Indebtedness incurred to address unforeseen calamities as declared by 
the President: Provided, that the utilization of the proceeds therefrom 
shall be subject to appropriations approved by Congress. 
SECTION 6. Debt Cap Implementation Plan. - The Department of 
Finance shall prepare a Debt Cap Implementation Plan to carry out the provisions 
of this law. 
Said Plan shall be submitted to both Houses of Congress through 
the House Committee on Appropriations and Committee on Banks and Financial 
Intermediaries and the Senate Finance Committee and Committee on Banks, 
Financial Institutions and Currencies within three (3) months from the issuance 
and official publication of the implementing rules and regulations of this Act. 
SECTION 7. Institutions Exempted from the Debt Cap. - Institutions 
mentioned under Section 5 hereof shall report their annual level of outstanding 
debt from all sources, foreign or domestic, regardless of maturity, to both 
Houses of Congress, through the House Committee on Appropriations and 
Committee on Banks and Financial Intermediaries and the Senate Finance 
Committee and Committee on Banks, Financial Institutions and Currencies. 
SECTION 8. Implementing Rules and Regulations. - The Department of 
Finance, in coordination with the Department of Budget and Management and 
the National Economic and Development Authority, shall promulgate the 
implementing rules and regulations for the implementation of this Act within sixty 
(60) days from its publication in two newspapers of general circulation. 
SECTION 9. Separability Clause, - If for any reason, any section or 
provision of this Act is declared unconstitutional or invalid, other sections or 
provisions which are not affected thereby shall continue to be in full force and 
effect. 
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6. Repealing Clause. - All laws, orders, decrees, rules and 
regulations inconsistent with the provisions of this Act are hereby repealed or 
modified accordingly. 
SECTION IIM Effectivity Clause, - This Act shall take effect fifteen (15) 
days after its complete publication in at least two (2) newspapers of general 
circulation in the Philippines. 
Approved,