ANALYSTS said sovereign debt, which is projected to exceed P19 trillion by the end of 2026, remains manageable, though sluggish economic growth could undermine revenue generation and complicate fiscal consolidation.
Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co. said the debt burden is manageable “if growth and revenues keep pace.”
Mr. Ravelas said for the debt as a proportion of gross domestic product (GDP) to remain at acceptable limits, the government must step up in enhancing tax collections while spending smartly.
The P19.06-trillion debt estimate is baked into the Budget of Expenditures and Sources of Financing (BESF).
By 2026, the debt-to-GDP ratio is expected to rise to 61.8% from 61.3% at the end of 2025.
Mr. Ravelas said the bigger proposed budget and more borrowing are likely expand the debt by the end of 2026.
He also said external debt costs are rising due to a weaker peso.
“It depends on what reforms the government genuinely undertakes to clean house to boost competitiveness to attract investment,” Ser Percival K. Peña-Reyes, director of the Ateneo Center for Economic Research and Development said via Viber.
External factors such as global interest rates and a weaker peso are also contributing to rising debt costs, Mr. Peña-Reyes noted.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the debt ratio is still within “acceptable limits” but below 60% would be ideal.
“If all else fails in terms of bringing down the NG debt-to-GDP ratio to more acceptable levels especially below the international threshold of 60%, new taxes and or higher tax rates are the final option/alternative,” he said via Viber.
The government has promised not to impose new taxes for the rest of its term.
At the end of June, debt rose 11.5% year on year to a record P17.27 trillion, bringing the debt-to-GDP ratio 63.1%, the highest ratio since 2005.
Foundation for Economic Freedom President Calixto V. Chikiamco raised the possibility of slower growth which could weigh on tax collection.
“It’s not so much the increase in debt that’s the problem, but the slowdown in economic growth, that will increase the debt-to-GDP (gross domestic product) ratio,” said via Viber.
In the second quarter, the economy grew 5.5%, against 5.4% in the three months to March but much slower than the year-earlier pace of 6.5%.
The second-quarter reading was at the low end of the revised 5.5% to 6.5% target range for the year. It had previously been set at 6-8%.
As early as June, the government’s top revenue collector, the Bureau of Internal Revenue (BIR) have called for the recalibration of its P3.23-trillion target this year after weak growth in the first quarter.
The Department of Finance said it downgraded the collection target of the Bureau of Customs, which earns from import duties and taxes, due to slower global activity.
In 2026, the BIR is expected to collect P3.58 trillion, while the BoC is projected to generate P1.01 trillion.
Under the 2026 BESF, the government aims to collect P4.98 trillion in revenue, 10.24% higher than the P4.52-trillion projected collection this year.
Asked by Kabataan Party-list Rep. Renee Louise Manda Co if he is open to new sources of revenue such as a wealth tax into a broader fiscal reform package, Finance Secretary Ralph G. Recto said: “We will not oppose your suggestions if you pass one in Congress.”
Mr. Recto earlier said the government is readying an online gambling tax to raise revenue while aiming to curbing social costs like gambling addiction.
Jose Enrique Africa of IBON Foundation rejected the assertion that government debt is manageable, noting the budget cuts resulting from fiscal consolidation, which are hurting social services and failing to meet the needs of the poor.
“Unless there’s a spectacular increase in revenue in the second semester, the government will have to keep borrowing, which will drive end-2026 debt above even the latest target,” he said via Viber.
Mr. Africa supports a wealth tax on billionaires or a windfall land value tax to increase revenue.
Mr. Africa also expressed concern over slower growth and tariff cuts on imports from the US.
The government expects to forgo P3 billion to P6 billion in revenue with the reduction of tariffs to zero on US products like automobiles, wheat, soy, and pharmaceuticals.
Mr. Chikiamco blames the strong peso for contributing to the slowdown in economic growth.
“The peso is too strong, eroding our export competitiveness. This is another reason why tourism is in a slump,” he said.
During the House Committee on Appropriations briefing on Monday, Akbayan Party-list Rep. Percival V. Cendaña pointed out that nearly all of the capital outlays for the next two years will be financed by debt.
“It’s deeply troubling to hear that almost all of our capital outlay for this year and next year will be funded through borrowing,” he said.
Mr. Recto said the projected P4.98 trillion in revenue next year leaves a P1.65 trillion funding gap, going by the P6.793 trillion National Expenditure Program.
“The deficit will be P1.646 trillion. All of the capital outlay that the government will spend this year and next year will be funded through debt,” Mr. Recto said.
The government’s borrowing plan for 2026 is P2.68 trillion, up 3.15%.
“It is more important now to ensure that we spend this money wisely, to ensure that the economy grows at a faster rate than your debt,” Mr. Recto said.
He said most of the debt will come from domestic sources, reducing exchange rate risk.
“We’re essentially paying ourselves back, and that’s how we manage our debt. But of course, there are limits. That’s why we’re working to reduce the deficit over time and staying mindful of key benchmarks like the debt-to-GDP ratio, general government debt-to-GDP, interest rates, inflation, and the growth rate,” Mr. Recto said. — Aubrey Rose A. Inosante
