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The Philippine government went on a borrowing spree to support its pandemic response and make up for the plummeting revenues at the height of the coronavirus crisis. For 2020 alone, its gross borrowings — which does not include all the payments made during the period — hit P2.74 trillion, matching the P2.757 trillion debt incurred from 2017 to 2019. 

In this B-Side episode, Alvin P. Ang, a professor at the economics department of the Ateneo de Manila University, speaks with BusinessWorld reporter Beatrice M. Laforga about the government’s rising debt and its impact on the economy. 


It’s natural for governments to borrow. 

Government borrowing primarily does two things, said Mr. Ang: pump-prime the economy by funding programs — such as infrastructure projects — that will drive growth; and address crises, financial or otherwise 

In 2017, the Duterte administration had to borrow money to fund the massive Build, Build, Build program. And it borrowed P2.74 trillion in 2020 to address the coronavirus disease 2019 (COVID-19) pandemic, which forced the government to implement lockdown measures that ground the economy to a near halt. 

 [When] the general confidence of businesses consumers is not there, they are not able to spend and produce so it is only the government, which is the third major player in the economy that comes in and borrows, Mr. Alvin said. 

Manageable debt’ is relative. 

It took 15 years for the Philippine government to bring down its debt-to-gross domestic product (GDP) ratio to an all-time low of 39.6% in 2019 from a high of 71.6% in 2004. 

“If your debt is lower than the whole capacity of the economy, you can still borrow. Even if you keep on borrowing more every year, but your GDP is increasing faster than your borrowings, then your debt-to-GDP is falling,” said Mr. Ang. “But I cannot say what is manageable because even countries as big as Japan and Singapore, they have a debt-to-gross domestic product ratio of more than 100%.”  

He cautioned that a high debt stock could limit not just the states space to incur more debts in the future, but also its plans to expand further. 

The government has to spend as much as possible on health. 

The huge debt pile has to be reduced at some point. But with the crisis still ongoing, Mr. Ang believes the government may need to wait a bit longer before it can start bringing down the debt levels and raise taxes to avoid hurting the economys long-term growth. 

I think the next government will still have to borrow because this is not a usual crisis. What they need is to spend as much as possible on health, on building our capacities and increase confidence once again, he said. “As long as these are muted, they have to spend. The government is the only entity that can really help the private sector and the consumers to get back into their groove of what they’re supposed to do.” 


This episode was recorded remotely on May 13. Produced by Paolo L. Lopez, and Sam L. Marcelo. 

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