Finance Secretary Ralph Recto: Philippines' Debt High Due to Pandemic Loans

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MANILA, Philippines — The nation's outstanding debt remains elevated as the government continues to settle loans taken out during the pandemic, Finance Secretary Ralph Recto emphasized on Monday.


Presenting at the House of Representatives during deliberations for the proposed P6.352 trillion budget for 2024, Recto pointed out that the Philippines had its lowest debt-to-GDP ratio in 2019, under former president Rodrigo Duterte, at 39.6 percent.


Recto explained that the debt-to-GDP ratio measures a country's total debt against its economic output. In 2019, the debt was at P7.7 trillion, with the GDP at P19.5 trillion. By the end of Duterte's term, debt surged to P13.4 trillion, raising the debt-to-GDP ratio to 60.9 percent of the P22.0 trillion GDP in 2022.


“We are also addressing pandemic-related borrowings from the previous administration. In 2019, our debt-to-GDP ratio was at its lowest with P7.7 trillion in debt. However, this figure nearly doubled to P13.4 trillion post-pandemic, just as the Marcos Jr. administration took over,” Recto informed lawmakers.


Adding to the financial challenge, global geopolitical tensions have driven borrowing costs higher post-pandemic, as central banks increased interest rates to combat inflation. “We are now refinancing the substantial borrowings contracted during the low-interest rate period from 2020 to 2022 with new debts at higher interest rates. This has resulted in an 11 percent increase in our interest payments for next year,” he added.


Despite the seemingly large debt, projected to reach nearly P16.1 trillion by the end of 2024, Recto stressed that the more critical measure is the debt-to-GDP ratio, indicating the country's ability to repay loans.


For the Philippines, the debt-to-GDP ratio has improved from 60.9 percent in 2022 to 60.1 percent in 2023. Although it is expected to slightly rise to 60.6 percent in 2024, projections show it decreasing to 56.3 percent by 2028, with debt at P20.7 trillion against a GDP of P36.9 trillion.


“We should not be alarmed by the absolute size of the debt. It's essential to compare it with the country's economy to determine our ability to repay. According to our chart, while debt is increasing, our economy is growing stronger, meaning we can meet our obligations. We've started reducing the debt-to-GDP ratio from 60.9 percent in 2022 to 60.1 percent in 2023, and we aim to bring it below 60 percent,” Recto emphasized.


Previously, Recto has called for calm, asserting that the country's debt remains manageable at around 60 percent.


Under the proposed P6.352 trillion national budget, P876.7 billion, or 13.7 percent, will be allocated for debt servicing.


In 2020, the Duterte administration borrowed a record P2.74 trillion to fund the government's COVID-19 response, more than doubling the P1.02 trillion borrowed in 2019. Total debt reached P12.68 trillion a week before Duterte left office.


The House of Representatives has formally begun deliberating the proposed P6.352 trillion national budget for 2025, with Speaker Ferdinand Martin Romualdez initially presiding. The House committee on appropriations started its briefing with the Development Budget Coordination Committee (DBCC) presenting its outlook and budgetary policies.


Recto's Department of Finance is part of the DBCC, alongside the Department of Budget and Management, National Economic and Development Authority, Office of the President, and the Bangko Sentral ng Pilipinas.

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