The national government’s gross borrowings expanded to P2.565 trillion in 2024, an increase of 16.9 percent from the preceding year’s level, the Bureau of the Treasury (BTr) said.
Data available on the BTr website as of Sunday showed the government’s gross borrowings last year rose from P2.193 trillion in 2023.
The amount borrowed in 2024, however, was within the government’s program of P2.57 trillion, the BTr said.
Domestic gross borrowings accounted for the lion’s share of the reported total amount. That translates to domestic gross borrowings of P1.923 trillion in 2024, up 17.69 percent from P1.634 trillion recorded in the preceding year.
The local gross borrowings last year stood close to the government’s program of nearly P1.924 trillion. Of that amount, P1.114 trillion was in fixed-rate treasury bonds, while P224.276 billion was accounted for by treasury bills.
At least P584.861 billion was raised in February through the retail treasury bonds offer.
External borrowings
Meanwhile, the national government’s external gross borrowings in 2024 amounted to P641.171 billion, a 14.69-percent increase from the P559.035 billion tapped from foreign sources the previous year.
The external gross borrowings for 2024 were 0.76 percent lower than the programmed amount of P646.084 billion.
Project loans accounted for P113.593 billion, while program loans reached P271.343 billion.
The government also raised P256.235 billion from its global bond issues in May and September last year.
‘Still within the program’
“The national government’s borrowings are largely a function of its budget deficit. Still, relatively higher prices and interest rates since 2022 could have bloated the government’s expenditures over the past three years, leading to higher borrowing to finance the said expenditures not covered by tax and other government revenues… It is still within/below the program,” Michael Ricafort, Rizal Commercial Banking Corp. chief economist told Malaya Business Insight.
A “weaker peso exchange rate versus the US dollar by about 13 percent and relatively higher interest rates since 2022 as triggered by the Russia-Ukraine war led to higher national government debt servicing bill, and also led to the increase in other government expenditures that, in turn, led to a wider budget deficit that needed to be financed by borrowings/debt. Despite all of these, the country’s credit ratings have been sustained at one to three notches above the minimum investment grade since the COVID pandemic or over the past five years,” he added.
Growth/debt sustainability
John Paolo Rivera, Philippine Institute for Development Studies senior research fellow, said the cost of borrowing remained high as global and local interest rates stayed elevated, prompting the government to frontload some of its funding needs.
“While tax collections improved, they were likely outpaced by spending needs, requiring higher borrowings. Also, a weaker PHP increased the PHP value of foreign-denominated borrowings,” Rivera said.
Rivera said that while the higher debt level raises fiscal risks, it also funds growth-enhancing programs like infrastructure, which can boost long-term productivity.
“The government must balance growth and debt sustainability, ensuring that new borrowings do not excessively widen the deficit or increase interest payment burdens,” Rivera said.
According to the Budget of Expenditures and Sources of Financing for 2025, the government’s gross borrowings for this year are projected at P2.55 trillion.
This amount is slightly lower than the P2.57 trillion in gross borrowings set for 2024.
Of the said amount to be borrowed this year, P2.04 trillion will be accounted for by local financing while P507.41 billion will come from external sources.
“The borrowing program for 2025 suggests a more cautious approach, possibly due to expected improvement in revenue collection through tax reforms and economic growth, gradual fiscal consolidation to maintain credit ratings and investor confidence, and possible rate cuts by global central banks, which may reduce borrowing costs,” Rivera said.
‘Pursue productive investment’
Meanwhile, Ateneo de Manila University economist Leonardo Lanzona highlighted the Department of Finance’s position to pursue further the investments deemed to be productive such as infrastructure and education, without raising taxes.
“As the costs of the productive investments increase and the debt servicing for previous loans remain high, the government is forced to engage in borrowing, given the current level of tax revenues. With a debt-to GDP ratio that is higher than the prescribed 60 percent, the government needs to reduce its borrowings. Otherwise, a financial crisis can occur,” Lanzona told Malaya Business Insight.
If the government does not want to reduce its productive investments such as infrastructure and schooling, Lanzona said, it can consider raising taxes on the wealth and incomes of the rich, as an alternative to high borrowings.
“The government could have imposed wealth and other capital earnings-based taxes. Indeed, for its revenues, the government has been dependent on excise taxes, which can result in higher prices on excisable commodities (such as oil), thus leading to inflation. Raising revenues from the incomes of the rich (which do not affect production costs) is not inflationary,” Lanzona said.
