Debt: A matter that is pulling down the Philippine economy

May 10, 2023

It was during the second Aquino administration that the Philippines had exited from the hold of the International Monetary Fund (IMF), a bright picture that depicted a country that was able to transition from being debt-ridden to being a sounder economy.

But this optimistic note was lost overnight under the Duterte watch. Without regard for long-term impact, the government was on a debt rampage, borrowing money to fund the doubling of salaries of uniformed men and women, investing in the much-ballyhooed ‘build, build, build’ projects, aggressive defense standing, creation of new departments, ballooning subsidies, and siphoning of loans to satisfy the unaudited confidential and intelligence funds (CIFs).

The rise of the national debt, exposed to inflation and the negative currency adjustments, further bloated during the second Marcos leadership.

As of today, the country’s outstanding debt, both domestic and foreign, stands at P13.8 trillion, the equivalent of US$249.64 billion. Explain in layman’s term, the total debt is the equal of two-and-a-half-year national budget if computed based on the P5.268-trillion appropriation for 2023.

Budget deficit

Recently, the budget management department (DBM) came out with a statement that as of March this year, the national government’s deficit had reached P210.3 billion, or a cumulative first-quarter shortfall of P270.9 billion. This is 12.04% or P22.6 billion higher than last year’s underperformance of P187.7 billion.

The DBM blamed the deficiency or fiscal gap on the decline of government receipts, which was at 11.99%, even if the spending was only 2.62%. It reported that the cumulative budget gap for Q1 2023 of P270.9 billion fell by 14.51%, or P46 billion, on a year-to-date (YTD) basis despite improved revenue collections thar rose by 4.38% or P34.3 billion during the same period.

“Total revenue collections for March,” the DBM said, “reached P258.7 billion, 11.99% or P35.2 billion lower than the previous year’s outcome of P293.9 billion. Nevertheless, YTD revenue for the 3-month period still surpassed the P784.4 billion collected last year for the same period by 4.38% or P34.3 billion.”

Tax collection, meanwhile, was at 87.89% or P719.5 billion of the total with non-tax revenue while the internal revenue collections for the month of March slid by 17.27% or P29.4 billion year-on-year to P141.0 billion. For this unimpressive performance, the blame was slapped on the impact of the transitory provisions of BIR Memorandum Circular No. 5-2023.


The March 2023 national government, the DBM reported, dropped by 2.62% largely due to the lower national tax allotment shares of LGUs and the control in the release of funds for programs like fuel subsidy. Even the overall expenditure of P1.1 trillion for the same quarter slightly slid by 1.06% due to lower interest payments in January.

Moreover, the March primary expenditures reached P408.0 billion, below the previous year’s figure. In total, the first quarter primary expenses totaled P947.6 billion. Interest payments for the same period stood at P60.9 billion, which is P5.4 billion higher than the previous year.

On the other hand, the total interest payments by the end of March amounted to P142.0 billion, down by 4.92% or P7.4 billion from the previous year. Similarly, the interest payment as a percentage of revenues also slid to 17.34% from 19.04% last year.

Runaway train

Chiefly due to anemic collection, inflation, and aggressive spending, including the runaway train known as the military and uniformed personnel (MUP) pensions, the national government was forced to resort to borrowing. In its first-quarter statement, the national treasury disclosed that the national debt had jettisoned to P13.86 trillion in March.

For the MUP sustenance alone, the government, on a yearly basis, has to shell out P850 billion, roughly a sixth of the national appropriation for 2023.

The treasury office reported that in March alone, “the P72.87 billion net issuance of domestic securities outweighed the P1.87 billion effect of local currency appreciation against the US dollar on onshore foreign currency denominated securities.”

As of December 2022, domestic debt rose by P304.78 billion while external debt swelled to P4.34 trillion, P33.15 billion more than the P4.31 trillion in November. This was due to “the P84.26 billion net availment of foreign loans and P18.53 billion impact of third-currency adjustments against the US dollar.”

Currency exchange has also affected the peso against the dollar. By last year’s end, the country’s external debt extended by P133.27 billion, while the guaranteed obligations contracted by P3.07 billion. This was due to the net repayment of domestic and external guarantees.

With kinks in the bureaucratic spending and the proliferation of graft and corruption chiefly due to porous laws and regulations, misuse, deviation, and misappropriation of public funds, hyperinflation will continue to factor in the rise of the national debt.


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