THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
*oJa Jut1 
First Regular Session 
1 
SENATE 
S.B. No. 
1 
~ 
Introduced by Senator Manuel B. Villar, Jr. 
EXPLANATORY NOTE 
The ris in the total indebtedness of the National Governmen has reached 
alarming proportions. From P600 billion in 1990, it has gone up to P2.385 trillion 
by 2001, reflecting an average annual growth rate of 13.37%. Consequently, 
interest payments have likewise ballooned from P71.1 billion in 1990 (already quite 
high) to P175 billion in 2001, a rise in debt servicing at an annual rate of 8.5%. 
There is little doubt that the rapid escalation in the debt stock has exerted a 
tremendous pressure on the fiscal management in view of the upsurge in debt 
servicing which limits the capacity of the National Government to boost the 
economy thru increased productive spending. This is made more difficult when 
revenue collections are soft. An easy way out is for the fiscal managers to resort to 
borrowings. There is nothing wrong with this, except, when it reaches a point 
where the huge debt stock begins to gobble an increasing share of the scarce 
budgetary resources for debt service payments, leaving relatively less for socio- 
economic spending. 
To minimize the propensity of fiscal authorities to borrow and instill greater 
discipline and prudence in public spending and revenue generation, there is a felt 
need to set a limit on the size of the debts stock that the National Government can 
sustain in relation to domestic output or GDP. Historically, the economy’s debt 
ratio averaged 71% albeit in 2001, it was already at 79%. Setting the maximum 
debt-to-GDP ratio at 75% will not mean NG’s debt stock will automatically decline 
since the economy is growing. But as a n  upper limit, NG will be constrained to 
exercise greater prudence in its borrowing program without limiting its choice of 
funding source, whether domestic or foreign. In view of automatic appropriations 
for debt service in the national budget, there is also a need for a sound debt policy 
that would correspond to the debt limitation scheme. Thus, this Act also provides 
that debt servicing should not be allowed to go beyond 5%, preferably it should 
average no more than 3% of GDP. 
It is expected that approval of this bill will go a long way towards greater 
innovativeness and care in the use of budgetary resources and their requisite 
financing. 
n 
MANUEL B. VI LAR, JR. 
1 


THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
1 
SENATE 
. 
S.B. No. 
Introduced by Senator Manuel B. Villar. Jr. 
“AN ACT PROVIDING FOR A CEILING ON THE DEBT STOCK OF THE 
PHILIPPINE GOVERNMENT9 INCLUDING CONTINGENT LIABITIES, 
AND FOR OTHER PURPOSES” 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Short Title- This Act shall be known as “An Act Fixing the 
Debt Stock of the Republic of the Philippines.” 
SECTION 2. Definition of Terms 
a) Debt Stock- cumulative total debt of the public sector 
b) Gross Domestic Product (GDP)- the value of all goods and services 
produced domestically. 
c) Debt Service- the sum of loan repayments, interest payments, 
commitment fees and other charges on foreign and domestic borrowings. 
SECTION 3. Debt CeiZing and Debt Service- In order to rationalize the debt 
management program of the Republic of the Philippines while providing flexibility 
as to the sources of borrowings that the Government of the Philippines may incur 
yearly to provide for expected budgetary deficit, the total debt stock that the 
National Government could be allowed to maintain shall not exceed seventy-five 
percent (75%) of the Gross Domestic Product (GDP) of the previous year; 
PROVIDED That debt servicing shall not exceed five percent (5%) of the GDP of the 
previous year. 
SECTION 4. Contingent LiabiZities - Contingent liabilities by way of 
guarantees of the Republic of the Philippines for account of its various 
instrumentalities, and other forms of financing government expenditures even 
those intended for socio-economic purposes shall also be subject to a ceiling of 
seventy-five percent (75%) of the Gross Domestic Product (GDP) of the previous 
year. 
SECTION 5. Exception - The debt ceiling may not be exceeded at anytime 
except during the existence of emergency like calamities, war, civil unrest, and 
threats against national security, which prompt the government to spend more, 
and upon the concurrence of Congress. 


SECTION 6. Sliding Limit -The debt limit shall be a sliding down limit that 
decreases as the economy progresses. For this purpose, the debt limit shall be 
allowed to gradually slide over time until the economy reaches a point where it can 
generate surpluses. 
SECTION 7. Reportorial Requirement - The Secretary of Finance shall, 
within 10 days from the end of every quarter of the calendar year, submit to the 
Congress a complete report on the country’s fiscal position and the financing 
activities the government has undertaken during the period. The report shall 
include information on all loans contracted and guaranteed by the national 
government. The summary report of the information shall be published in at least 
two newspapers of national circulation. 
SECTION 8. Joint Legislative-Executive Oversight CommittebThere is 
hereby created a joint Legislative-Executive Oversight Committee to monitor and 
review the contingent liabilities of the Republic of the Philippines and recommend 
measures and policies for the effective implementation of this Act. 
a) The Committee shall be composed of nine (9) members. Three (3) 
members from the Senate and tree (3) members from the House of 
Representative. The other three members shall be the Secretary of the 
Departments of Budget and Management, the Secretary of the 
Department of Finance and the Governor of the Bangko Sentral ng 
Pilipinas. 
b) The Chairman of the Senate Committee on Finance shall be the Chairman 
of the 
Oversight Committee, while the Chairman of the House Appropriations 
Committee shall be the co-Chairman. 
b) The Senate President shall appoint the two other members who shall 
come the 
majority and the minority. The Speaker shall likewise appoint the two 
from the House of Representatives who shall come from the majority and 
minority. 
members 
the 
SECTION 9. Implementation Rules and ReguZations - The Secretary of 
Finance 
shall formulate and implement the necessary rules and regulations pursuant to 
this Act. 
SECTION 10. Repealing Clause - Any provision of law, decree, order or 
rules and 
regulations as are inconsistent with the provisions of this Act are hereby repealed 
or modified accordingly. 
SECTION 11. Effectivity - This Act shall take effect after fifteen (15) days 
following 
its publication in the Official Gazette or in two (2) newspapers of general 
circulation, 
Approved,