Understanding the Philippine government debt
By Prinz Magtulis
When it comes to government affairs,
debt is a hated word and is almost synonymous with bad news.
But few people outside the bureaucracy really understand it and what
it means in public finance.
Every month, the Philippine government reports its level of
outstanding debt. As of May 2025, that amount stood at
P16.92 trillion, according to the Bureau of the
Treasury.
The absolute value looks astonishing. But there is more to public debt
than this number, so let's examine it.
Understanding the Philippine government debt
By Prinz Magtulis
When it comes to government affairs,
debt is a hated word and is almost synonymous with bad news.
But few people outside the bureaucracy really understand it and what
it means in public finance.
Every month, the Philippine government reports its level of
outstanding debt. As of May 2025, that amount stood at
P16.92 trillion, according to the Bureau of the
Treasury.
The absolute value looks astonishing. But there is more to public debt
than this number, so let's examine it.
The amount of debt reported monthly only covers liabilities owed by
the national government. It does not include obligations incurred by
cities, municipalities and provinces or some government financial
institutions like the Social Security System or the Philippine Health
Insurance Corp. (PhilHealth). These are reported separately.
Debt is owed either in pesos (domestic) or in other currencies
(external or foreign). The government has historically borrowed mainly
in pesos or from local sources because doing so has benefits like
protection against foreign exchange swings that can increase the value
of debt.
As of May 2025, the latest period for which data is available, nearly
70% of national government debt were domestically sourced, while the
balance of about 30% were in various currencies like the US dollar,
euro, yen or sterling.
Debt is mostly in pesos
Share of foreign and domestic debt
100% of national government debt
100% of national government debt
100% of national government debt
While a ballooning debt appears alarming, policymakers have resisted
raising red flags on account of the absolute value of debt. Instead,
they closely watch a different metric altogether, one that economists
believe better measure how sustainable the debt pile is, or in simple
words, how capable are we in settling our debt on time.
This is the debt to GDP ratio or the proportion of debt to gross
domestic product— the sum of all products and services created in an
economy. The idea behind the debt ratio is, so long as the economy
grows faster than the government's debt, enough revenues should be
generated to cover your obligations. After all, you only borrow when
revenues fall below what you spend on.
The lower the ratio, the better the government's ability to service
its debt. That said, the Philippine government has lost a lot of
ground. As of the first quarter, debt accounted for 62% of GDP,
Treasury data showed, far higher than the record-low of 39.6% recorded
in 2019, before the pandemic messed up government budgeting plans.
Philippines debt burden worsens
Debt as a proportion of GDP
Debt piled up when the pandemic struck because the Duterte
administration had to borrow more than it initially projected to fund
its response to the health crisis. Programs such as cash support to
furloughed workers and poor households as well as vaccine procurement
added to typical public projects every year, pushing up spending costs
the past three years.
What corresponds to a healthy debt to GDP differs, although not
widely. Countries which are members of the euro area are mandated that
their debt be not more than 60% of GDP. The Marcos administration has
cited a higher benchmark recently, saying a debt to GDP ratio of
below 70%
is considered manageable.
The debt data reported every month is a cumulative number. That is,
the amount accummulates through time and the pile gets handed down
from one administration to the next. From July 2016 to June 2022, debt
has more than doubled under the six years of former president Rodrigo
Duterte, the largest increase since records started in 1993. Of all
previous presidents, Gloria Arroyo's second term as leader and Benigno
Aquino's presidency added the smallest to the debt pile.
As of May, Ferdinand Marcos Jr.'s government was accummulating debt
similar to the pace of the Duterte administration.
Marcos Jr. accummulating debt similar with Duterte's pace
Change in national government debt since the assumption of each
presidency
Gloria Arroyo, second term
Gloria Arroyo, first term
Debt more than doubled under Duterte
Gloria Arroyo, second term
Gloria Arroyo, first term
Debt more than doubled after Duterte borrowed to fund Covid
response
Gloria Arroyo, second term
Gloria Arroyo, first term
Note: Latest data for Marcos as of May 2025. Joseph Estrada was
toppled from office in January 2001. Gloria Arroyo, then
vice-president, served the remainder of his term until June 2004
before winning the presidential election that year.
Source:
Author's analysis of Treasury data
Interest rates and payment terms
Apart from the debt level, interest is also monitored. Like borrowing
from a bank, interest makes a debt more expensive. While the
government has little to no control on how much interest lenders
charge, it can influence it. This is where things like
credit ratings
matter because they serve as a barometer of the government's
capability to pay, potentially inducing creditors to lend at a lower
interest.
Many think that we borrow a lot through loans from institutions like
the World Bank or other countries like Japan and the U.S. While we do
count them as among our creditors, our biggest lenders are in fact
local investors.
Interest rates have climbed back up again
Weighted average interest rate of
domestic and
foreign debt
Note: No available data for 2024 and year-to-date of 2025.
Source: Bureau of the Treasury
These may cover banks, private companies to insurance firms which have
funds to park and grow for future needs of their clients. It's not
very straightforward, but just imagine how your insurance policy
pledges to grow your money after 10 or 20 years after-- they do so by
lending your money and growing interest out of it. For them, this is
considered investing. For the government, this is recorded as a
borrowing.
Lenders like insurers invest by buying Treasury bonds and bills sold
by the government to the local market every week, and periodically to
the foreign market. Securities, as they are also known, accounted for
over 60% of the debt pile as of May, data showed. They can be payable
anywhere from three months to 25 years.
Data showed that the government now appears to have a problem of
bunching up of debt. That means most of its existing debt are falling
due in the near term, instead of being spread out across time. This
potentially creates a payment problem.
The government typically refinances its debt, which means it borrows
new money to pay maturing debt. That said, interest payments on debts
are still largely funded by government revenues. Hence, any additional
debt will require the government to set aside more funds to pay
interest, instead of of spending them on public projects.
Debts are bunching up in the short-term
Outstanding government bond issuances based on residual maturity
P3.65 trillion in Treasury bonds
About P800 billion in Tbonds are due this year, mostly retail
Treasury bonds
P3.65 trillion in Treasury bonds
About P800 billion in Tbonds are due this year, mostly retail
Treasury bonds
About P800 billion in Tbonds are due this year, mostly retail
Treasury bonds
Source: Author's analysis of Treasury data
That said, the government has also historically offered bondholders
the option to
swap
their old debt for new ones with longer payment periods, thereby
delaying settlements.
Note:
Originally published Oct. 15, 2023. This piece has been updated as
of July 9, 2025.
Sources:
Bureau of the Treasury, Department of Finance
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Data Dictionary
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