The Philippines has to reduce its outstanding debt by half to keep up with its peers in Southeast Asia, but this is not possible this year due to the economic crisis, according to Finance Secretary Margarito Teves.
 
Teves said the government must cut its debt level by 50 percent to bring down the ratio of the country's debt stock to the gross domestic product (GDP).

He pointed out that the Philippines' debt-to-GDP ratio currently stands at 56.3 percent, much higher than Singapore's 41.5 percent, Malaysia's 39.7 percent, Indonesia's 32.4 percent, and Thailand's 24.1 percent. The regional average is 30.6 percent.

"We need to cut debt by 50 percent," the finance chief reiterated.

However, Teves said the government will not be able to do this due to its deteriorating finances.

Teves said the Philippines may only be able to trim its debt-to-GDP ratio to 55.7 percent this year and 53.4 percent in 2010 instead of the programmed 45 percent and 43 percent, respectively.

Debt-to-GDP ratio is one of the indicators used by credit-rating agencies, such as Moody's, Standard & Poor's and Fitch Ratings, in assessing a country's credit standing and the manageability of its debts.
 
The Philippines, which borrows heavily to pay off maturing foreign and domestic obligations and plug its budget deficit, is likely to incur higher obligations over the next few years.

Fitch earlier warned of a credit rating downgrade for the country if its debt-to-GDP ratio further deteriorates.

The Philippines has raised its budget deficit ceiling for 2009 to P199.2 billion or 2.5 percent of GDP from the revised target of P177.2 billion or 2.2 percent of GDP.

In the first quarter of the year, the budget shortfall more than doubled to P119.7 billion, already nearly two-thirds of the full year target, due to accelerated spending and weak tax collections.