THE national government’s outstanding debt as of end-March inched up from the previous month’s level to a new high of P16.684 trillion, Bureau of the Treasury (BTr) data showed, marking a weight shift from external to local borrowings.
The national government’s total debt stock rose by 0.31 percent from the P16.632 trillion recorded in February 2025 due to higher domestic borrowings during the period.
The outstanding debt, compared with the end-March 2024 level, was up by 11.78 percent from P14.926 trillion.
Heavier on domestic debt
As of end-March 2025, the government’s domestic debt comprises the majority or 68.2 percent of the total debt stock, while external obligations account for 31.8 percent.
“This financing mix reflects a prudent approach to debt management to help mitigate exposure to external risks while taking advantage of the country’s liquid domestic market,” the BTr said.
Domestic debt amounted to P11.38 trillion as of end-March 2025, a 1.39 percent increase from P11.224 trillion a month earlier.
“This was mainly due to the net issuance of domestic securities worth P157.86 billion, demonstrating strong investor confidence in government instruments,” the BTr said.
“The increase was partially offset by the peso’s continued appreciation, which resulted in a P2.03 billion downward revaluation,” it added.
Year-on-year, domestic debt rose by 10.72 percent from P10.277 trillion as of end-March 2024.
‘Within sustainable levels’
The BTr asserted the government is keeping debt growth well within sustainable levels, and that the country remains firmly on track to achieve fiscal consolidation and reduce the debt-to-gross domestic product ratio to below 60 percent by 2028.
“The country’s recent credit rating upgrades and reaffirmations underscore strong investor confidence in the country’s economic fundamentals, translating to greater demand for Philippine bonds, thereby preserving government access to reasonable borrowing costs, crucial for sustaining the country’s inclusive growth momentum,” the BTr said.
Insulated from sudden shocks
“As of end-March 2025, 91.5 percent of the outstanding debt carries fixed interest rates, insulating the country from sudden shifts in global interest rates and currency movements. In addition, 81.3 percent of the obligations are long-term, giving the government ample fiscal space and time to support growth-enhancing investments,” it added.
Decline in foreign debt
Meanwhile, the national government’s external debt totaled P5.304 trillion, a 1.92 percent decline from P5.408 trillion month-on-month.
“The reduction was primarily due to the P66.22 billion decrease in the peso equivalent of US dollar-denominated debt behind local currency appreciation, as well as the net repayment of external loans, which further trimmed the external debt total by P60.84 billion,” the BTr said.
“These more than offset the P23.19 billion upward revaluation effect of third-currency movements against the US dollar,” it added.
The government’s foreign debt went up by 14.12 percent as of end-March from P4.648 trillion a year earlier.
Risk-averse sentiment
Reinielle Matt Erece, economist at Oikonomia Advisory & Research Inc., said the increase in government debt came from the issuance of treasury bonds and bills these past few weeks, both of which were oversubscribed.
“This reflects the risk-averse sentiment of investors while waiting for stability and major market catalysts, as well as confidence in the national government (because of) the investment-grade credit rating,” Erece said.
“The decrease in foreign debt, on the other hand, is brought by the strength of the peso against the dollar. Furthermore, the month-on-month decrease may also be brought by base effects on the large bond offering in February,” he added.
John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the marginal month-on-month increase in outstanding debt, driven mostly by domestic borrowing, keeps the debt ratio within a manageable range of around 60 percent of GDP.
“The shift toward more domestic borrowing reduces forex risk and cushions against global rate volatility, but may also crowd out private investments or pressure domestic interest rates if borrowing volumes stay high,” Rivera said.
“The sustainability of this (debt) trajectory hinges on robust revenue mobilization, spending discipline and stronger GDP growth to outpace debt accumulation,” he added.
New tax rates
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said that in view of the streak of record highs in the government’s outstanding debt in recent months, the intensified tax collections using existing tax laws may not be enough and would require new tax or fiscal reform measures to curb additional borrowings by the government.
“The additional debt incurred by the government since the pandemic lockdowns started more than five years ago already reached more than P7 trillion,” Ricafort said.
“New taxes and higher tax rates, if deemed necessary, need to be fair, equitable and progressive, especially targeted to those that can afford them or those from the higher income brackets or at least prevent adding burden to the poor, most vulnerable sectors, and those hit hard by the pandemic,” he added.
In the coming years the increase in government debt would still remain sustainable as long as the debt-to-GDP ratio remains around 60 percent, and even better below that threshold as an important international margin, RCBC’s chief economist noted.
“Many other countries in Asia as well as other developed countries around the world have much higher debt-to-GDP ratios than the Philippines, some of these countries are already near 100 percent or even above 100 percent,” he said.
“However, it is important to remain as close as possible to the 60 percent debt-to-GDP international threshold to make the country’s relatively favorable credit ratings and overall economic and fiscal debt management sustainable over the long-term and for the coming generations,” he added.
