Internal and External Debt in the Philipoines

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“A national debt, if it is not excessive, will be to us a national blessing.” * Alexander Hamilton.

From the statement above, candidly, it was right. Sometimes we need to borrow money in order to finance what we really needed, especially when we are financially deprived. Most people have debts of their own and it comes in many forms, like bank loans, mortgage loans, notes payables, bonds and its interests, or simply from a lender.

Our government borrows money for the purpose of financing the government’s budget deficits and makes some profitable and least cost projects for our country. A greater capital outlay from the national budget can support infrastructures for development, all planned for the advancement of the greater good. These budgets and debts may only depend on how the government handles these. These borrowings by our government are commonly known as “National debt”. Since the Government is generally the representative of people, Government debt or national debt is actually debt of the people or tax payers. Hence national debt is also known as public debt.

National debt can be categorized into two: internal and external debt. Internal debt is owed by the government to its own citizen while external debt is owed by the government from other countries or bodies outside the country. For internal borrowings, the government may issue securities or borrow directly from commercial banks. For external borrowings, the government may borrow money from the World Bank or from IMF or borrow directly from governments of more affluent countries.

I. Statement of the Problem
The objective of this study is to know:
1. What is the size of the internal debts and how has it evolved overtime? 2. What is the size of the external debts and how has it evolved overtime? 3. How do budget deficits or budget surpluses affect the build-up of debt? II.


The information about the internal and external debts of the Philippines are obtained from the Selected Philippine Economic Indicators (SPEI) of Bangko Sentral ng Pilipinas (BSP) under the annual reports of National Government Cash Operations and Philippine External Debts.

The SPEI is a compilation of annual reports of BSP. The table in 1990 up to 1992 refers to the accounts of Central Bank of the Philippines while the tables in the year 1993 and onwards refer to the Bangko Sentral ng Pilipinas.

The amounts of internal debts are all denominated In Million Pesos, while External Debts are all denominated In Million US Dollars. To compute for the annual growth rate of the internal and external debts, we used the formula: Growth Rate= Debtcurrent year- Debtprevious yearDebtprevious year ×100%

In computing for the compound growth rate of the internal and external debts, we used this formula: Most recent yearMost previous year1Number of years-1- 1 ×100%

III. Presentation and Analysis
National Government Cash Operations
| 1990| 1991| 1992| 1993| 1994| 1995| 1996| 1997| 1998| 1999| Revenue| 180,902| 220,787| 242,714| 260,405| 336,160| 361,220| 410,449| 471,843| 462,515| 478,502| Expenditure| 218,096| 247,136| 258,680| 282,296| 319,874| 350,146| 404,193| 470,279| 512,496| 590,160| Surplus / (deficit)| (37,194)| (26,349)| (15,966)| (21,891)| 16,286| 11,074| 6,256| 1,564| (49,981)| (111,658)| Table 1|

| 2000| 2001| 2002| 2003| 2004| 2005| 2006| 2007| 2008| 2009| Revenue| 514,762| 567,481| 578,406| 639,737| 706,718| 816,159| 979,638| 1,136,560| 1,202,905| 1,123,211| Expenditure| 648,974| 714,504| 789,147| 839,605| 893,775| 962,937| 1,044,429| 1,149,001| 1,271,022| 1,421,743| Surplus/(deficit)| (134,212)| (147,023)| (210,741)| (199,868)| (187,057)| (146,778)| (64,791)| (12,441)| (68,117)| (298,532)| Table 2|

The government Revenue increased by 16.76% from...
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