The Duterte administration will be passing on the nation’s largest outstanding debt, as measured against gross domestic product, in the post-Marcos era, at an estimated 60.9 percent this year.
A national debt that sizable means the country’s next President will have to face the problem of considering tax reforms and spending cuts in order to avert a potentially catastrophic debt crisis.
Department of Finance chief economist Gil Beltran said the new government would have to embark on fiscal consolidation wherein tax rates could be raised and state expenditures slashed.
The debt pile has jumped to P11.73 trillion as of end-2021, equivalent to 60.5 percent of GDP, which means the Philippines owes P60.5 to creditors for every P100 worth of goods and services it produces. Further, the latest debt ratio surpassed not only government’s program of 59.1 percent, but also the international standard of 60 percent, raising concerns on the country’s capacity to repay its obligations.
Data also shows that the Duterte administration will pass on the largest debt payable in the next 10 years since former president Joseph Estrada’s time. As of 2021, more than a third of the outstanding debt at around P3.92 trillion will mature within the decade, pushing the next two administrations to pursue fiscal policies to pay for these debts.
Given the ballooning debt, the state’s economic team plans to submit a consolidation plan containing a list of fiscal measures that may be worth considering for the next administration. As Beltran said, Duterte’s successor will have to shake up the tax system and tighten on spending. Such measures could make the next administration unpopular with the people but that is the challenge whoever is in charge will have to face. Given the amount of national debt it has to deal with, the next administration’s economic team will have their work cut out for them. Hopefully this time around, the leader we choose in the upcoming elections will have the credentials, experience and competency to select the right economic and fiscal path for our struggling nation that is still recovering from the COVID-19 pandemic and reeling from the effects of the thoroughly unjustified war in Ukraine.*
