PH debt seen hitting record P21.5T by 2027

National

NEARLY one in every six pesos in the proposed 2027 national budget could go toward interest payments as government debt is projected to climb to a record P21.479 trillion next year.

The projection, contained in the Department of Budget and Management’s (DBM) Budget of Expenditures and Sources of Financing for fiscal year 2027, is based on an assumed exchange rate of P62 to the US dollar and comes as the government pursues a slower pace of fiscal consolidation.

The proposed P7.2-trillion national budget was transmitted to Congress on Tuesday along with the new debt projections.

The projected debt stock is nearly 9 percent higher than the revised P19.765 trillion estimate for 2026 and almost 68 percent above the P12.79 trillion inherited by the Marcos administration in June 2022.

DBM Assistant Secretary Romeo Balanquit said the weaker peso has increased the cost of servicing foreign-denominated loans, noting that many were contracted during the pandemic when the exchange rate was around P49.6 to the dollar.

“So many of our loans were contracted during the pandemic. During that time, forex was just around P49.6 to a dollar. Now, it’s around 60. With that, we can say the peso has depreciated by almost 20 percent. That led us to incur higher costs,” Balanquit said in an Inquirer article.

He also said older loans contracted at lower interest rates are now maturing and have to be refinanced at prevailing, higher rates, adding to borrowing costs.

Of the projected 2027 debt stock, P14.282 trillion is expected to be domestic debt and P7.197 trillion external debt.

Despite the higher debt in peso terms, the debt-to-gross domestic product (GDP) ratio is projected to ease to 64.4 percent next year from 64.9 percent in 2026, according to Balanquit. It is expected to decline further to 63 percent by 2030.

As of end-June, outstanding national government debt stood at P19.07 trillion, equivalent to a debt-to-GDP ratio of 66 percent when measured against the economy’s 2.3-percent second-quarter growth.

The government is expected to pay P2.704 trillion in debt service in 2027, including P1.114 trillion in interest payments. The latter is equivalent to 15.9 percent of the proposed national budget and nearly 12 percent above the P995.61 billion programmed for 2026.

Principal amortization is projected at P1.590 trillion, while gross borrowings are set at P3.304 trillion. These will help finance a projected P1.694-trillion fiscal deficit, or 5.1 percent of GDP.

Balanquit said the higher deficit trajectory also contributed to the government’s increased borrowing requirements.

For Philippine Institute for Development Studies senior research fellow John Paolo Rivera, the figures indicate tighter fiscal space.

“Debt burden remains elevated and a sizable portion of government resources is already committed before funding new programs through interest payments. The concern is not only the size of the debt, but the growing cost of carrying it,” he said in the same report.

Balanquit maintained that the record debt level should not automatically be considered bad debt, saying the borrowings are being used for productive, long-term investments, particularly infrastructure, as well as program and project loans and official development assistance.(MyTVCebu)