President Ferdinand Marcos Jr. on Wednesday said the government is concerned about the country’s debt even though the country is doing better than its neighbors.
The Philippines’ debt-to-gross domestic product (GDP) ratio is “not ideal,” Marcos told members of the US-ASEAN Business Council who visited the Palace.
“We worry about our debt-to-GDP ratio in the Philippines, as it stands at about 63 percent and that’s a little high for us and it is not ideal,” he said.
The debt-to-GDP ratio is the metric comparing a country’s public debt to its GDP. By comparing what a country owes with what it produces, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts.
The country’s sovereign debt grew to a new record of P14.15 trillion at the end of June, data from the Bureau of Treasury shows.
Since becoming President last year, Marcos has added P1.36 trillion to the national debt.
“We’re doing better than our neighbors perhaps but nonetheless, it’s still something that we need to be looking at,” he said.
Marcos said he also “worries about the constriction of the economy by very high interest rates.”
The Bangko Sentral ng Pilipinas has so far raised its benchmark rate to 6.25 percent from a record low of 2 percent last year, as it tries to curb inflation, which hit a 14-year high in January.
“This is something that we have to balance,” Marcos said.
Despite these, the President said the Philippines continues to register positive economic numbers.
“I am happy to report that the Philippines is on track not only for economic recovery but to achieving an upper-middle economic status within a couple of years,” he said.
“Despite global economic headwinds, our GDP post-pandemic defied predictions through sound economic and fiscal policies, responsive reforms, and an enabling economic environment that drove commerce and domestic consumption,” he said.
He said the World Bank had originally projected 5 percent growth for the Philippines but has raised this to 6 percent.
“There are new shocks that have come in, but I think we can take measures to continue the growth rate of our economy,” he said, adding that “aggressive infrastructure projects” have been started.
Earlier, House Deputy Speaker Ralph Recto said the 2024 national budget of P5.767 trillion translates to an average daily spending of P15.8 billion, but only P11.7 billion of that is supported by revenues, leaving a P4-billion hole that must be plugged by debt.
The Department of Finance (DOF) on Wednesday said it was committed to bringing down the debt-to-GDP ratio to under 60 percent by 2025, cutting the deficit-to-GDP ratio to 3 percent by 2028, and maintaining infrastructure spending at 5 percent to 6 percent of GDP.
As of March 2023, the national government debt-to-GDP ratio was recorded at 61.0 percent, way below the 63.5 percent ratio in the first quarter of 2022, the DOF said.
The latest data from the Bureau of the Treasury showed that the country’s total outstanding debt hit a record-high of P14.15 trillion as of end-June 2023 from P14.10 trillion as of end-May 2023 as the government borrowed more to finance its budget deficit.
Of the total debt stock, 31.4 percent was borrowed from international sources while 68.6 percent were domestic borrowings.
Finance Secretary Benjamin Diokno on Tuesday said that only 12.1 percent, or equivalent to P699.2 billion, of the proposed P5.768-trillion budget for the fiscal year 2024 is allocated to financing the debt burden, including net lending.
“When assessing the debt burden component of the budget, it is crucial to solely consider interest payments and net lending,” Diokno said in a statement.
He said interest payments have been declining, freeing up fiscal resources which could be reallocated to support the government’s priority programs.
Data shows that from 1986 to 2015, the average share of interest payments to the total national government expenditures stood at 23.3 percent. This further declined to an average of 10.1 percent from 2016 to 2022.
“For 2024, the allocation for interest payments is only 11.6 percent or P670.5 billion of the 2024 budget. This allows us to spend more on socioeconomic programs and projects in our priority sectors such as education and infrastructure,” Diokno said.
Diokno also said that under any accounting standard, the principal amortization of debt is not included in the expense item since it is not classified as expenditure, hence it is not automatically appropriated.
“The settlement of debt obligations incurred from expenses were already recorded in the past. Therefore, principal amortization only represents the fulfillment of financial responsibilities arising from previously recorded expenses,” Diokno said.
