FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. _-=:1=-:-3,,-,0,,-
Introduced by Senator FRANKLIN M. DRILON 
EXPLANATORY NOTE 
Debt may be defined as the current use of future revenue. 
Viewed from 
this perspective, every government must be more prudent and discerning in 
committing future revenues to pay for its current expenditures. 
A proxy for economic output, GDP is the amount of goods and services 
produced in a country. The debt-to-GDP ratio is a key measure of how 
manageable is a country's obligation relative to its annual economic output, 
with a declining ratio viewed favorable as this means the country would allot a 
smaller amount to payoff its debt.! 
Based on the projections of Asian Development Bank, the Philippines' 
debt-to-gross domestic product (GDP) ratio may rise by 15 percent by 2015 in a 
scenario of higher primary deficit to GDP. In 2009, the Philippines' debt-to-
GDP ratio stood at 56.5 percent, the highest among Asian countries. 
Reducing the proportion of the country's outstanding debt-to-GDP will 
improve its credit worthiness and ability to attract investors. 
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. 
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. 
In view of the foregoing, approval of this bill is strongly recommended. 
ILON 
I 'ADB warns Philippines of "debt stress" " News Updates, www.aseanaffairs.com, 21 April 2009 


FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. ~1~3~O_ 
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 Sendte and House of Representatives of the 
Philippines in Congress assembled: 
SECTION 1. Title. - This Act shall be known as the "Debt Cap Act". 
SEC. 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. 
SEC. 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 and/ or budget support. 
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. 
d) "National Government" refers to the entire machinery of the central 
government, as distinguished from the different forms of local 
governments. 
SEC. 4. Debt Cap - Within five (5) years from the enactment of the Act, 
the consolidated outstanding debt of the National Government and of 
government-owned and/ or controlled corporations shall not exceed, at anyone 


time, an amount equivalent to One Hundred (100) percent of the country's 
nominal Gross Domestic Product. 
Within another five years and thereafter, 
said outstanding debt shall not exceed Eighty (80) percent 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 (100) percent of 
Gross Domestic Product. 
SEC. 5. Exceptions to Debt Cap - The following indebtedness shall be 
deemed excluded from the computation of total amount of indebtedness 
subject to the debt cap: 
a) 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; 
by 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. 
SEC. 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 apd regulations of 
this Act. 
SEC. 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. 
SEC. 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. 
SEC. 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. 
SEC. 10. 
Repealing Clause -
All laws, orders, decrees, rules and 
regulations inconsistent with the provisions of this Act are hereby repealed or 
modified accordingly. 
SEC. 11. Effectivity Clause - This Act shall take effect after fifteen (15) 
days following its publication in at least two (2) newspapers of general 
circulation. 
Approved,