f
EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
)
S E N A T E
S. No. 
597
* ^ K i0 (lu r  of ll)i- fi»i riptnrp
•19 
JUL 17 P6 «9
Introduced by Senator Ralph G. Recto
RECEI'n 0 ti‘
n
AN ACT
SETTING A CEILING TO THE INDEBTEDNESS OF THE REPUBLIC OF THE 
PHILIPPINES 
TO 
ENSURE 
MACRO-ECONOMIC 
STABILITY 
AND 
SUSTAINABLE GROWTH AND FOR OTHER PURPOSES
Explanatory Note
The country's total outstanding debt as of 2018 is P7.3 trillion, of which P4.78 
trillion is domestic and P2.52 trillion is foreign.1 The rising total outstanding debt is 
attributable to the increasing domestic and foreign obligations and the impact of 
foreign exchange fluctuations.
The government's huge budget deficit results in a seemingly relentless borrowing 
to cover expenditures for needed infrastructure and services. Results from an 
International Monetary Fund (IMF) study provide support for the hypothesis that 
higher debt service crowds out public investment.2 If left uncontrolled, the public debt 
can balloon to a magnitude that can wreak havoc on the fiscal balance. This can have 
a negative impact on the economy as a whole and with grave consequence on the 
quality of life of the people.
This bill proposes to put a cap on the indebtedness of the government at 50% 
of the Gross Domestic Product (GDP). From years 2014-2018, the debt-to-GDP ratio 
of the Philippines stood at 45.4%, 44.7%, 42.1%, 42.1%, and 41.8% respectively.1
1 Source: http://www.lreasury.gov.pli/wp-conient/uploads/20l9/04/debtindic-annual2004-20l8final-l.pdf. Accessed on June 
26, 2019.
^ IMF Working Paper entitled, “External Debt, Public Investment, and Growth in Low-Income Countries” by Benedict 
Clements. Rina Bhattacharya, and Toan Quoc Ngtiyen


Though the debt-to-GDP ratio already went down to 41.8% in 2018, the proposed cap 
will simply secure the prevention of potential negative impacts of high public debt on 
economic activity. The debt ceiling may be breached only when there are extraneous 
events beyond the control of the government subject to Presidential certification, and 
approval of Congress.
Historically, our fiscal managers have never met the original program targets set 
forth in the national budget documents submitted to Congress. Every year, they 
propose to Congress a formula on how to finance the proposed expenditure program 
for the incoming year. But at the end of the year, the actual revenue collections fall 
short of the numbers reflected in the Budget of Expenditures and Sources of Financing 
(BESF).
This proposed measure also puts a cap on the borrowings of the national 
government by mandating the Chief Executive to go back to Congress and seek 
authority to borrow more in the event that the national government fiscal deficit target 
submitted by the President is breached before the end of the fiscal year. It is essential 
that Congress should be closely guided by a borrowing program developed by the 
President to restore fiscal discipline before the country falls into another debt trap.
Hence, this bill proposes to compel our economic managers to be more accurate 
and prudent in their targets on the revenue and expenditure program. Likewise, this 
will allow Congress to assert its power of the purse. Moreover, the debt cap will require 
the government to exercise prudence in spending and strengthen its fiscal 
management. Setting limits to borrowings will provide opportunities for better 
prioritization of programs and projects as it has to spend within available resources.
It is hoped that this measure will be seriously considered for immediate approval.
/ejcv


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
)
S E N A T E
S. No. 
597
iDditr of tli: fei-'r tnrp
^j;i- 
Scani'
'19 
JUL 17 P6 «9
zpi
Introduced by Senator Ralph G. Re?^Scl ‘11'’ "
AN ACT
SETTING A CEILING TO THE INDEBTEDNESS OF THE REPUBLIC OF THE 
PHILIPPINES 
TO 
ENSURE 
MACRO-ECONOMIC 
STABILITY 
AND 
SUSTAINABLE GROWTH AND FOR OTHER PURPOSES
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress assembled:
1 
Section 1. Short Title. -  This Act shall be known as the "Government
2 
Indebtedness Cap A ct'.
3 
Sec. 2. Debt Cap. -  The national government and any of its agencies, offices,
4 
government-owned and controlled corporations (GOCCs) shall limit its total
5 
indebtedness which carry the sovereign guaranty of the Republic of the Philippines to
6 
an amount not exceeding fifty percent (50%) of the latest Gross Domestic Product
7 
(GDP): Provided, That the debt ceiling set herein may be temporarily breached when
8 
there are extraneous factors beyond its control including occurrence of catastrophic
9 
emergencies of national proportion, as may be declared by the President and upon
10 
consultation with both Houses of Congress. The presidential certification must specify
11 
the urgency and necessity of such breach, the period of time within which the
12 
government should offset the breach, as well as measures to cushion the effects of
13 
said breach to the national economy: Provided, further. That in the event that the
14 
national government fiscal deficit target as indicated in the Budget of Expenditures
15 
and Sources of Financing (BESF) submitted by the President of the Republic of the
16 
Philippines to Congress, pursuant to Section 22, Article VII of the 1987 Constitution,
17 
is breached, the Government of the Philippines shall in no case borrow from foreign
18 
and/or domestic sources without the prior approval of the House of Representatives
1


1 
and concurrence by the Senate: Provided, finally, That the debt cap set forth in this
2 
Act shall not preclude the adoption of another debt policy option or a combination of
3 
debt options that will reduce the country's outstanding debt stock.
4 
Sec. 3. Reporting Requirement -  The Secretary of Finance shall, within ten
5 
(10) days from the end of every quarter of the calendar year, submit to Congress a
6 
written report on the country's fiscal position and the modes of financing the
7 
government has undertaken during the period.
8 
Sec. 4. Separability Clause. -  If any part or provision of this Act shall be held
9 
unconstitutional or invalid, other provisions, which are not affected thereby, shall
10 
continue to be in full force and effect.
11 
Sec. 5. Repealing Clause. -  All laws, presidential decrees, executive orders,
12 
rules and regulations inconsistent with the provisions of this Act are hereby repealed,
13 
amended or modified accordingly.
14 
Sec. 6. Effectivity. -  This Act shall take effect fifteen (15) days after its
15 
publication in the Official Gazette or in at least two (2) national newspapers in general
16 
circulation.
Approved,