The Philippine government’s debt is expected to go beyond P21 trillion in 2027. This is mainly because the peso has become weaker, according to the Department of Budget and Management (DBM).
Based on the newest budget report, the debt will grow by 8.7 percent to reach P21.48 trillion by the end of 2027. This is higher than the P19.77 trillion expected this year. Of the total debt next year, P14.28 trillion will come from local lenders, while P7.2 trillion will come from foreign lenders.
Budget official Romeo Matthew Balanquit said the weaker peso and slower efforts to fix the budget are the main reasons for the rising debt. He explained that many loans were taken out during the pandemic, when the exchange rate was around P49.60 to a dollar. Now, it’s about P60 to a dollar. This means the peso has dropped in value by almost 20 percent, making old loans more expensive to pay.
As of the end of June, the country’s debt was already at P19.07 trillion. This is 66 percent of the country’s total economic output, the highest ratio in 22 years. Balanquit said many old loans with low interest rates are now due for repayment. The government will need to borrow again to pay these off, but at higher interest rates this time.
Despite the increase, Balanquit said the country’s debt is still under the 70 percent limit recommended by the International Monetary Fund. He also said the borrowed money is not “bad debt” because it funds long-term projects like infrastructure, not just aid.
Meanwhile, the government’s borrowing plan for next year has increased to P3.3 trillion, up from P2.73 trillion this year. Most of this, P2.39 trillion, will come from local sources, while P915 billion will come from foreign lenders. Borrowing is expected to increase further in the coming years, reaching P3.65 trillion in 2028.
Because of the higher debt, the government will also need to spend more to pay it off. Debt payments are expected to rise to P2.7 trillion next year, a 32.2 percent increase. Of this amount, P1.6 trillion will go toward paying the loan itself, and P1.11 trillion will go toward interest payments.
