“Mortgage the future to bankroll past and present graft on top of incompetence, as our leaders keep borrowing more and more”
OUR government’s outstanding debt as of end-June was P17.27 trillion, the Bureau of Treasury says. By the end of 2025, it is projected to be 17.35 trillion.
It is now equivalent to more than 62 percent of our GDP. For developing countries, the World Bank considers 60 percent debt to GDP ratio as the rule of thumb for sustainable borrowing, although recently, our economic managers are saying that 70 percent is manageable.
Maybe, but that depends on several factors, the most important being the growth of the economy. Simply put, if our GDP increases faster than our government borrowings, that would be alright.
Where we borrow also matters. If most of government debt is from foreign sources, then it is vulnerable to foreign exchange movements. In our case, roughly 69 percent of our debt are domestic borrowings.
The 31 percent is from foreign sources, and must be paid in foreign exchange, basically dollars.
Now that the dollar is around 58 to the peso, as compared to June’s 56.50 and May’s 55.70, one could figure out what I mean by the preceding paragraph.
Analysts estimate that if a dollar would cost 59 to 60 pesos, the debt to GDP ratio would be as high as 65 percent.
The debt maturity averages 5.5 to 6 years, which means P2 trillion is needed to pay the principal of our obligations annually. Another P1 trillion pays for interest, which means the debt exacts some P3 trillion in financing annually.
Where do we get this kind of money? Utang pa more.
And since foreign loans may be hard to come by when we breach the 60 percent debt-to-GDP ratio, despite assurances of our economic managers that 70 percent is still A-Okay, government will borrow more from domestic sources.
Banks will buy government securities because these are guaranteed by the State, which means whoever is elected in 2028 and beyond, will need to pay the banks.
Between June 2024 and June 2025, that domestic borrowing grew by 13 percent, which crowds out the ability of local business, especially the medium and small-scale enterprises our DTI keeps vowing to protect and grow, to source much-needed capital for expansion, let alone operation.
Under normal circumstances, debt payments should be paid for by increased government revenues.
But since our manufacturing sector is tepid, our agricultural production negative with our own food security in peril, our tourist arrivals lagging behind every other ASEAN country other than Myanmar and Laos, where will we source the funds needed to pay off our loans?
From consumption expenditures which we tax with 12 percent VAT.
And where does this mostly come from?
From our OFWs who remit some $34 billion to their families here and our BPO workers whose jobs are now threatened by AI and robots.
Still, government grows our expenditures annually so that for 2026, the president’s submitted expenditure program is P6.8 trillion, up by P500 billion from 2025’s P6.3 trillion, which was P600 billion higher than 2024’s P5.7 trillion.
But government does not earn enough revenues to fund the P6.8 trillion of which almost a trillion is needed to service interest on the debt. So what to do? Utang pa more.
Now don’t get me wrong.
Borrowings by government, if used to build useful and lasting infrastructure (not the likes of the Cabangan bridge in Isabela which collapsed after being inaugurated, or the P1.2 trillion worth of flood control projects that worsened rather than mitigated flooding) would serve to grow the economy, attract foreign investors, and invite more tourists.
But that’s the big IF.
Utang pa more to pay past due debt, to pay the salaries of our bloated bureaucracy with legions of USecs and ASecs, plus the administrative costs of maintaining that bureaucracy and, worst of all, to finance the projects and ayuda of our legislators, as well as the one trillion pesos worth of IRA for LGUs which more often than not, but for very rare exceptions, are larded with tongpats and frivolous expenditures such as beautification, fiestas and “study” travel.
Since future debt grows to finance past and present debt, and more than a Ptrillion goes to the pockets of the corrupt with little benefit for the economy, how would you describe the Philippines?
In plain and simple language – bankrupt.
Meanwhile, suffer the bad roads, the collapsible bridges, drown in the floods, get bogged down by endless traffic, endure the bad state of public health, the mis-education of our youth.
In fine, mortgage the future to bankroll past and present graft on top of incompetence, as our leaders keep borrowing more and more.
