The national government’s outstanding debt has grown 1.63 percent month-on-month and 10.29 percent year-on-year to P16.312 trillion as of end-January, with a depreciated peso and further borrowings boosting the debt stock, the Bureau of the Treasury (BTr) reported on Tuesday.
BTr data showed the government’s debt stock increased from P16.051 trillion in December 2024 and from P14.79 trillion in January that year.
“The month-over-month rise in debt stock was due to the net incurrence of new domestic and external debt, as well as the impact of peso depreciation against the US dollar, from P57.847 at the end of 2024 to P58.375 at the end of January 2025,” the BTr said in a statement.
“This level remains manageable and in line with the government’s target to support economic development while ensuring fiscal sustainability,” the Treasury bureau said.
Analysts, however, warned this development might have a negative connotation in terms of foreign investment and global credit rating.
On one hand, they pointed to the risk of excessive debt servicing, saying that could limit the government’s ability to fund essential services and future investments. On the other hand, they also warned that a rising debt level may put pressure on domestic interest rates, increase inflation risks, and strain the national budget, especially if government revenues do not grow in proportion to borrowing.
John Paolo Rivera, Philippine Institute for Development Studies (PIDS) senior research fellow, said the government is facing the challenge of sustaining investor confidence and credit ratings.
“While the debt-to-gross domestic product ratio remains manageable, the government must show commitment to fiscal consolidation to maintain investor confidence and credit ratings,” Rivera told Malaya Business Insight.
Domestic debt accounted for 67.9 percent of the total government debt stock, while external obligations comprised 32.1 percent.
Domestic debt stood at P11.084 trillion as of end-January, up 1.41 percent from P10.93 trillion as of end-December 2024.
“This was mainly due to the net issuance of government securities of P152.17 billion as gross issuances of P270.01 billion exceeded repayments of P117.84 billion to partly finance the projected deficit for the quarter,” the BTr said.
Victor Abola, University of Asia and the Pacific senior economist, said about 75 percent of the increase in outstanding debt represents the global bonds issued by the Philippine government in January, with the rest being domestic borrowings.
The weaker peso against the dollar added P1.51 billion to the total debt in January, the BTr said.
“A weaker PHP, or external shocks could make foreign-denominated debt more expensive to repay, increasing vulnerabilities in the external debt position,” Rivera said.
Year-on-year, the government’s outstanding local debt rose by 9.07 percent from the end-January 2024 level of P10.162 trillion.
The national government’s external debt amounted to P5.229 trillion, a 2.1 percent increase from P5.12 trillion on-month.
The BTr said this was driven by P59.3 billion in net borrowings from foreign lenders, as well as the unfavorable revaluation from the peso-dollar exchange rate and third-currency movements amounting to P46.74 billion and P1.75 billion, respectively.
In the coming months, the outstanding government debt could go to new record highs amid new national government borrowings at the early part of the year, Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said in a separate response to a query by Malaya Business Insight.
There is a need to hedge local and foreign borrowings in view of the Trump factor that caused volatility in the global financial markets since October 2024 as Trump’s proposed higher US import tariffs and other protectionist measures could lead to higher US inflation and fewer Fed rate cuts, he said.
“That, in turn, could be matched locally,” Ricafort added.
Michael Gerard Enriquez, president of Sun Life Investment Management Trust Corp., said the higher debt in January was mainly propelled by a weaker peso.
“If this continues then, we might see higher long-term rates persist as funding for the budget deficit comes from more debt,” Enriquez said.
The government’s external debt as of January 2025 rose 12.98 percent from P4.628 trillion a year earlier, BTr data showed.
“The government must ensure that tax collections, privatization efforts, or economic expansion generate enough funds to cover obligations. With global interest rate trends, borrowing costs may remain elevated, increasing debt servicing expenses and straining the national budget,” Rivera of PIDS said.
On the bright side, Abola said borrowing for economic growth is fine, as long as these are used for capital expenditures which expand the productive capacity of the economy.
There is also the possibility that the strength of the peso in February will help lower the government’s foreign debt level.
This could be positively offset by the stronger peso exchange rate in February 2025 versus January 2025 that could reduce the peso equivalent of the national government’s outstanding external debts, RCBC’s Ricafort said.
Also, government borrowings used efficiently to fund infrastructure and social programs could support economic growth, Rivera added.
