Monday, May 14, 2007

Do we need to worry about our national debt?

According to a recent Inquirer report, the national govertment's debt stands at P3.9 trillion as of February 2007. Although a 1.7% decrease from a year ago, this figure means that each of the estimated 87 million Filipinos share a P44,793 obligation to this dept. This dept is so huge that it is estimated to be 69% of our 2006 Gross Domestic Product (GDP). Many would think that we should be aiming for a debt-free nation to really show that we are progressing. However, if you will compare our nation to much more industrialized ones, you will see that we are not doing as badly as we think. Japan's debt is currently at 175% of their GDP, Singapore at 100% and the US at 64.7%. This method of assessing a nation's debt ranks the Philippines on the 20th place in terms of debt to GDP ratio. The European Union, for instance, requires that a country's debt not exceed 60% of GDP to be admitted to its organization. It is therefore agreeable to have fairly high levels of debt as investments during lean times which can be paid back with tax revenues which increase as the economy prospers. The debt of the Philippine government should not worry you more than other obvious factors such as poverty, unemployment, population growth and poor education.
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