Reducing spending and public debt, raising credit ratings
Last Monday, Oct. 27, I attended the 2025 Fiscal Policy Conference organized by the Department of Budget and Management (DBM), held at the UP College of Law. In the afternoon there were simultaneous panel sessions. I attended the panels on “Digitalization and Process Innovations” with three speakers: Department of Finance (DoF) Undersecretary Renato Reside, Jr., Ateneo de Manila University Professor Albert Matthew Alejo, and Department of Economy, Planning and Development (DEPDev) Undersecretary Joseph Capuno.
In the second set of simultaneous discussions, I attended the panel on “Fiscal Stability and Sustainability,” also with three speakers: Ateneo Professor Elvira de Lara-Tuprio, Congressional Policy and Budget Research Department (CPBRD) Director Ricardo Mira, and Bangko Sentral Director John Michael Hallig.
Among the topics discussed in the two sets of panels was why countries with high Public Debt/GDP ratios of above 100% (like Singapore, Japan, the US, France) have high credit ratings of A+ to AAA and hence, can borrow at lower interest rates, while countries with Debt/GDP ratios below 90% (like India, Thailand, and the Philippines) have lower credit ratings of BBB.
One explanation given is that high ratings countries have higher GDP per capita income, of $30,000 or higher, while those with BBB have GDP per capita of below $8,000. But there are exceptions here. There are economies with low Debt/GDP ratios and per capita income and high ratings — Taiwan and Hong Kong (see Table 1).
The Philippine economic team — the secretaries of the DoF, DBM, DEPDev, and the Special Assistant to the President for Investment and Economic Affairs — continue to aspire and hope that we reach credit ratings of A before the end of the Marcos Jr. administration. And rightly so because our annual borrowings are not declining despite the absence of any economic or virus-caused crisis like the lockdowns of 2020-2021.
Before the lockdown, the Philippines’ outstanding debt (actual plus guaranteed) was only P8.22 trillion in 2019. Then it jumped to P10.25 trillion in 2020, P12.15 trillion in 2021, P13.82 trillion in 2022, P14.97 trillion in 2023, P16.40 trillion in 2024, and P17.81 trillion in August 2025. In other words, public debt was rising by an average of P1.64 trillion/year, which is roughly the budget deficit of around P1.55 trillion/year over the same period.
Guaranteed debt is generally flat below P400 billion, it is the actual debt that keeps rising — P17.47 trillion as of last August (see Table 2).
One thing I noticed on Monday, was that in order to reduce public debt, there were few or no proposals from the speakers to make significant spending cuts, to reign in expenditures at least to balance with projected revenues.
Perhaps that is one reason why the DBM invited me to participate in the forum, to inject this point of view. But I chose not to ask questions during the panels as there was little time. I preferred to listen and understand the concepts and methodologies that the academics and speakers from government presented, including their complicated Greek mathematical and regression equations.
One thing I notice among the agencies — if they see that new sources of revenue or borrowing are available next year, they quickly invent new ways of spending and new subsidies or expand existing ones. High Debt/GDP ratios and high interest payments (an average of around P2.6 billion/day in 2025) do not seem to bother them. They just focus on asking for even higher budgets every single year despite the absence of a clear economic or social crisis which are the basis of raising subsidies in the first place, like the lockdowns of 2020-2021.
Finally, that military and uniformed personnel (MUP) pensions, from an average of about P110 billion/year until 2024, jumped to P144 billion this year and are proposed to increase to P198 billion next year. That is one clear example of wasteful and abusive spending that will penalize taxpayers today and tomorrow. Congress and the President should rein in that spending. Better yet, if active MUP officials were more sensitive to taxpayers and admit the public finance burden of the scheme, they themselves volunteer to contribute to their own pension someday. And stop the injustice of pension indexation to the salaries of active MUPs.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.
