EIGHTEENTH CONGRESS OF THE. )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.B.No,_4538

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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.' 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.’ 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.' 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
“soar: p/n ron gn pp cone 19/4 ebndomuat2004 20 pa Acs on he 26,2019.

php content/poad/201
2 MF Working Pape ented, “xteral Debt ube nvestment and Growth n Low-Income Counties" by Benedict Clements, Rina Bhattacharya, ond Toon
‘ee nowven

1


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 considgr€d



wCarvwaunueune

1
12
13
14
15
16
17
18

EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.B, No, 4938

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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 of Representatives of the Philippines in Congress
assembled:

Section 1. Short Title. - This Act shall be known as the "Government Indebtedness
Cap Act".

Sec. 2. Debt Cap.— The national government and any of its agencies, offices,
government-owned and controlled corporations (GOCCs) shall limit its total indebtedness
which carry the sovereign guaranty of the Republic of the Philippines to an amount not
exceeding fifty percent (50%) of the latest Gross Domestic Product (GDP): Provided, That
the debt ceiling set herein may be temporarily breached when there are extraneous factors
beyond its control including occurrence of catastrophic emergencies of national proportion,
as may be declared by the President and upon consultation with both Houses of Congress.
‘The presidential certification must specify the urgency and necessity of such breach, the
period of time within which the government should offset the breach, as well as measures to
cushion the effects of said breach to the national economy: Provided, further, That in the
event that the national government fiscal deficit target as indicated in the Budget of
Expenditures and Sources of Financing (BESF) submitted by the President of the Republic of
the Philippines to Congress, pursuant to Section 22, Article VII of the 1987 Constitution, is
breached, the Government of the Philippines shall in no case borrow from foreign and/or
domestic sources without the prior approval of the House of Representatives and concurrence
by the Senate: Provided, finally, That the debt cap set forth in this Act shall not preclude the


warauneraone

eet
12
13
14

adoption of another debt policy option or a combination of debt options that will reduce the
country's outstanding debt stock.

Sec. 3. Reporting Requirement. ~ The Secretary of Finance shall, within ten (10) days
from the end of every quarter of the calendar year, submit to Congress a written report on the
‘country's fiscal position and the modes of financing the government has undertaken during
the period.

Sec. 4. Separability Clause. — If any part or provision of this Act shall be held
unconstitutional or invalid, other provisions, which are not affected thereby, shall continue to
be in full force and effect.

Sec. 5. Repealing Clause. — All laws, presidential decrees, executive orders, rules and
regulations inconsistent with the provisions of this Act are hereby repealed, amended or
modified accordingly.

Sec. 6. Effectivity. — This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in at least two (2) national newspapers in general circulation.

Approved,