The huge national government debt stock at P16.312 trillion as of end-January has raised a red flag and calls for accelerated economic growth, deeper reforms and fiscal discipline, economists said yesterday.
Some economists said the government debt stock is far from catastrophic levels for the economy, and remains manageable but they see the need to address it with immediate measures to stem any ensuing rises in interest costs.
The BTr reported last week that 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 the end of January.
BTr data showed the government’s debt stock increasing to P16.051 trillion in December 2024 from P14.79 trillion in January of that year.
In terms of the country’s debt-to-gross domestic product (GDP) ratio, the level has reached 60.7 percent as of end-2024, the BTr said.
Manageable, but needs reform
“The national government debt-to-GDP ratio at 60.7 percent (is) still slightly above the international threshold of 60 percent, still considered manageable, but needs to be brought down to help sustain the country’s favorable credit ratings of one to three notches above the minimum investment grade,” Michael Ricafort, Rizal Commercial Banking Corp. chief economist, told Malaya Business Insight.
“As inflation eases further and becomes more benign, new and higher taxes through tax reform measures may be needed at some point, if more intensive tax revenue collections based on current tax laws would not be enough to further bring down the NG debt-to-GDP ratio to below the 60 percent international threshold,” he said.
Ricafort said the rightsizing of the government and other fiscal reform measures to improve efficiency on expenditures may also be needed to reduce the debt-to-GDP ratio to below 60 percent and make the country’s budget deficit, debt and overall fiscal management performance more sustainable over the long-term and for the coming generations.
“(This is) on top of running after tax cheats, anti-leakage/anti-wastage/anti-corruption measures to structurally narrow the budget deficit and temper growth in the overall debt,” Ricafort added.
Ateneo De Manila University economist Leonardo Lanzona said the current debt situation of the counry has lately become “disconcerting.”
“Our debt-to-GDP ratio is now slightly higher than the prescribed ratio of 60 percent.
This could have been higher if not for non-tax revenues gotten by the government by appropriating PhilHealth fund … or by gradually depleting the country’s international reserves, including gold,” Lanzona claimed.
Financial crisis fear
“While such measures can temporarily alleviate the debt problem, this is hardly sustainable because much of the government’s priority programs, including those under social security, have been categorized under unappropriated programs, or are still awaiting funds. If the government begins to run out of government-owned and controlled corporation money or international reserves, debt will be the option left,” he added.
Lanzona said that with more debt and less confidence in the government, a financial crisis is bound to ensue.
“This structural problem in debt seems to be affecting already domestic investment and consumption as can be noted in the slow weakening of the housing sector,” he said.
Meanwhile, Cielo Magno, an associate professor at the University of the Philippines School of Economics and former Department of Finance Undersecretary, said the current debt level is “worrisome especially when we are already borrowing to finance the daily operation of government.”
Wasteful spending
Magno highlighted the point that the current operating expenditure of the government exceeds the expected and projected government revenue.
“It means we are borrowing to finance a portion of our current operating expenditure,” Magno said.
“What is recommended is debt-to-GDP ratio of below 60 percent. We need to manage the revenue side, avoid revenue-eroding measures and ensure efficient revenue collection, generate more revenues from activities like mining and sin products,” he said.
On the expenditure side, Magno pointed out that wasteful spending should be avoided.
“Social programs should be better targeted. And investments should be on infrastructure that are truly beneficial and investment in human capital (health and education) should be prioritized,” Magno said.
Jose Ramon Albert, senior research fellow at the Philippine Institute for Development Studies and former national chief statistician, sees no need to be alarmed over the current debt level.
He said while the Philippines’ debt-to-GDP ratio slightly above 60 percent is usually considered a red flag, the context tempers alarm.
“Over half of the debt surge occurred during COVID-19 (not only for the Philippines but many developing countries), when emergency spending (e.g., cash aid, healthcare, vaccines) was critical to avert economic collapse. Pre-pandemic debt stood at a safer (level at about) 40 percent of GDP,” Albert said.
Albert led the National Statistical Coordination Board as secretary general before it was merged into the Philippine Statistics Authority.
He said the debt matters less as a raw number and more in how it is used.
“The government’s focus on productive investments is pivotal to debt sustainability,” Albert said.
Extrapolation
To provide context to the ordinary Filipino regarding the current amount of NG debt, Malaya Business Insight sought Albert’s expertise in illustrating its scale through everyday expenses—calculating how many sacks of rice each household could afford or how many students could be sent to college if the entire P16.3 trillion were redirected toward these essential needs.
“Rice and tuition prices are based on current averages. The debt itself is not earmarked for these purposes—this is purely illustrative,” Albert said.
The statistician calculated the figures based on a total population of 110 million Filipinos, equating to 27.5 million families, each consisting of four members.
Using this assumption, each family’s share of the P16.3 trillion debt amounts to about P592,727. If allocated to rice, Albert said this could purchase 494 sacks of 25-kilogram rice per family, based on a price of P1,200 per sack.
“If a family consumes two sacks/month (50kg total, or about 1.25kg/day for four people), 494 sacks = 20.6 years’ worth of rice,” Albert said.
Meanwhile, the estimated cost of a four-year college degree is P200,000 per student, or P50,000 per year.
If the entire P16.3 trillion debt were allocated to education, based on Albert’s computations, it could fully fund 81.5 million students through a four-year degree, or equivalent to sending all 3.5 million Filipino college-aged students to school for 23 years.
Alternatively, 29.6 percent of the total population could earn a college degree, Albert said.
Finance Secretary Ralph Recto via Viber yesterday cited the government’s fiscal framework that addresses concerns regarding the debt-to-GDP level breaching 60 percent.
The “government has a macro fiscal framework that reduces the deficit gradually from 7.2 percent to 3.7 percent (of GDP) by 2028 and debt from 62 percent to 57 percent of GDP by 2028,” Recto said.
“So far we are on track,” he added.
