SIXTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PIDILIPPINES 
) 
First Regular Session 
) 
SENATE 
'13 JIll -8 P2 :59 
621 
S.No. __ 
_ 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
The country's total outstanding debt as of 2012 is P5.4 trillion, of which P3.4 trillion is domestic and 
P2.0 trillion is foreign. I The total outstanding debt is increasing because the government has not kept the 
commitment to meet revenue targets and manage our fiscal position. 
The government's huge budget deficit results in a seemingly relentless borrowing to cover 
expenditures for needed infrastructure and services. Results from an 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 60% of the Gross Domestic 
Product (GDP). From years 2000-2006, the debt-to-GDP ratio of the Philippines stood at 60.5%, 61.3%, 
67.1%,73.8%,74.4%,68.5% and 61.4% respectively. I Though the debt-to-GDP ratio already went down to 
51.4% in 2012, 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. Every year, they propose to Congress a formula on how they would 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 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 compel the government to exercise prudence in spendi4g 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 immIJl>:diflte-<approvai. 
ejcv 
I Source: http://www.treasury.gov.phlstatdatalyearlylyr _debtilldicator.pdj Accessed on March 18, 2013 
2 IMF Working Papel entitled, "External Debt, Public Investment, and Growth in Low-Income Countries" by Benedict Clements, Rma Bhattachmya, and Toan Quoe 
Nguyen 


SIXTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PIDILIPPINES 
) 
First Regular Session 
) 
SENATE 
S.No. 627 
futroduced by Senator Ralph G, Recto 
AN ACT 
Senafl' 
;lj}lh~t "I t~. ,~.mtar~ 
'13 JIL -8 P 2 :59 
o 
SETTING A CEILING TO THE INDEBTEDNESS OF THE REPUBLIC OF THE 
PHILIPPINES TO ENSURE MACRO-ECONOMIC STABILITY AND SUSTAINABLE 
GROWTH AND FOR OTHER PURPOSE 
Be it enacted by the Senat~ and the House oj Representatives oj the Philippines in Congress 
assembled: 
1 
SECTION 1. This Act shall be known as the "Government Indebtedness Cap Act oj2013", 
2 
SEC. 2. 
The national government and any of its agencies, offices, GOCCs shall limit its 
3 
total indebtedness which carry the sovereign guaranty of the Republic of the Philippines to an 
4 
amount not exceeding 60% of the latest Gross Domestic Product (GDP), 
5 
SEC. 3. 
The debt ceiling provided herein may be temporarily breached when there are 
. 
. 
I 
6 
extraneous factors beyond its control including occurrence of catastrophic emergencies of national 
7 
proportion, as may be declared by the President and upon consultation with both Houses of 
8 
Congress, The presidential certification must specify the urgency and necessity of such breach, the 
9 
period of time within which the government should offset the breach, as well as measures to 
10 
cushion the effects of said breach to the national economy, 
11 
SEC. 4. 
In the event that the national government fiscal deficit target as indicated in the 
12 
Budget of Expenditures and Sources of Financing (BESF) submitted by the President of the 
13 
Republic of the Philippines to Congress, pursuant to Section 22, Article VIl of the 1987 
14 
Constitution, is breached, the Government of the Philippines shall in no case borrow from foreign 
15 
and/or domestic sources without the prior approval of the House of Representatives and 
16 
concurrence by the Senate, 
17 
SEC. 5. 
The debt cap provided for in this Act shall not preclude the adoption of another 
18 
debt policy option or a combination of debt options that will reduce the country's outstanding debt 
19 
stock. 
20 
SEC. 6. 
The Secretary of Finance shall, within ten (10) days from the end of every quarter 
21 
of the calendar year, submit to' Congress a written report on the country's fiscal position and the 
22 
modes of financing the government has undertaken during the period, 
23 
SEC. 7. 
All laws, decrees and orders or parts thereof inconsistent with the provisions of 
24 
this Act are hereby repealed or modified accordingly, 
25 
SEC. 8. 
This act shall take effect fifteen (15) days after its publication in the Official 
26 
Gazette or in two (2) newspapers of national circulation, 
Approved, 
(