| Photo by Isaac Smith on Unsplash
In recent years, the Philippines has witnessed a significant increase in its national debt, which has sparked both concern and debate. From 2021 to the end of 2024, the nation’s debt grew markedly, reflecting the government’s efforts to navigate economic challenges and support public welfare amid global uncertainties.
2021: The Initial Surge
At the end of 2021, the Philippines’ outstanding national debt stood at approximately ₱12.68 trillion. This notable increase was driven by the need to finance pandemic-related expenditures and stimulate economic recovery. The government’s proactive approach aimed to mitigate the impacts of COVID-19, ensuring that essential services and support reached those in need.
2022: Continuing the Climb
By the end of 2022, the debt had risen to around ₱13.42 trillion. The year saw ongoing efforts to bolster healthcare infrastructure, provide financial aid to affected communities, and invest in economic recovery programs. While these measures were crucial, they also contributed to the growing debt burden. The government must plan for a time when manpower overseas deployment will slow and foreign exchange remittances plateau, if not decline altogether. The climb in national debt need not be inexorable. Paying it down instead of piling on to it or at least achieving a hiatus for the economy to catch up to debt service.
2023: Pressing Forward
The debt trajectory continued its upward trend in 2023, reaching ₱14.616 trillion. This increase was partly due to the government’s continued borrowing to finance infrastructure projects and social programs. The debt-to-GDP ratio became a focal point of discussions, indicating the country’s ability to manage its debt relative to its economic output. Debt is not bad; when appropriately deployed, debt can be a tool for nation-building, not just bricks and mortar, but a nation of productive individuals, commerce, and industry. At the current pace, the national debt could peak at Php20 trillion by 2028. Will this be a burden too heavy?
2024: Nearing the Peak
At the end of 2024, the Philippines’ national debt stood at ₱16.051 trillion, marking a 9.8% increase from the previous year. The debt-to-GDP ratio was slightly above the target, standing at 60.7%. This ratio is a critical indicator of the nation’s fiscal health, reflecting the balance between debt levels and economic growth.
Managing the Debt: Strategies and Challenges
The Philippine government has employed various strategies to manage the rising debt. These include a mix of domestic and external borrowing, proactive debt management, and exploring alternative financing options. Domestic debt, in particular, played a significant role, with net issuances of government securities contributing to the overall debt levels.
“While the rising debt levels are a cause for concern, they also reflect the government’s commitment to addressing immediate economic challenges and investing in the nation’s future.
Implications for the Future
The rising debt levels pose several challenges for the Philippines. Maintaining economic stability, achieving higher growth rates, and implementing effective fiscal reforms will be crucial. The government’s projections indicate a gradual reduction in the debt-to-GDP ratio, with targets of 60.4% in 2025, 60.2% in 2026, and 56.3% in 2028. GDP propped up by borrowing instead of organic growth is both foolish and unsustainable. Philippine politicians ignore the debt and favor unmitigated handouts instead of livelihood endeavors that supplement incomes and address food security and widespread hunger.
Hopefully, the ever-growing mountain of debt does not leave a legacy of substandard infrastructure that would require more debt to repair, a people bereft of initiative and trapped in a culture of mendicancy, and a political system that depends on patronage instead of vision and meaningful reform.
Tax and fiscal reforms are essential to restoring the debt-to-GDP ratio to international thresholds. Intensifying tax collections, encouraging compliance, and ensuring efficient resource allocation will be key steps in this direction.
Intensifying tax collections demands innovative solutions. It is an open secret that internal revenue examiners wield enormous discretion during audits, discretion severely disadvantageous to the government. It can be mitigated by digitalizing the broader economy, rendering transactions more transparent. Tax filers should be incentivized to report internal revenue scalawags by rewarding them with lifetime tax exemptions and lump sum awards based on taxes they owe.
Customs officials are also notoriously perceived as corrupt. The evasion of customs duties destabilizes markets, providing untold profits to technical smugglers, from legitimate merchandise to illicit drugs. Customs duties could be collected at the source, such as manufacturers; this removes any discretion from customs inspectors. Customs clearance could also be speeded up.
Incentives should be provided to whistleblowers. The National Internal Revenue Code (NIRC) also warrants a review. The current emphasis on land area and population has inadvertently resulted in urban congestion and countryside deprivation. The NIRC should invert the allocation tables to favor rural development by channeling resources to the poorest communities. This would likely result in urban decongestion, redistribution of wealth, countryside development, and mitigation of perennial insurgency.
Conclusion
The period from 2021 to 2024 has been a time of significant financial maneuvering for the Philippines. While the rising debt levels are a cause for concern, they also reflect the government’s commitment to addressing immediate economic challenges and investing in the nation’s future. A balanced approach to debt management and fiscal discipline will be essential for sustainable growth and financial stability as the Philippines progresses.
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ABOUT THE AUTHOR: Dr. Crispin Fernandez advocates for overseas Filipinos, public health, transformative political change, and patriotic economics. He is also a community organizer, leader, and freelance writer.
