The Department of Finance said that bringing down the government’s debt ratio to pre-pandemic level of 39 percent is not crucial for the new administration, stating it will have to wait until 2027 to reach 52.5 percent from the current over 60 percent, which is below international standards.
Finance Secretary Benjamin E. Diokno said that the Marcos administration is not aiming to bring back the government’s pre-pandemic debt to gross domestic product (GDP) ratio of around 39 percent, stressing that priorities should be on economic growth and needs of the people.
Asked if the Marcos administration is planning to bring back the 39.6 percent debt ratio seen before the pandemic struck in 2022, Diokno said “given where we came from, I think it will be wrong for us to shoot for that level.”
“I think we have to prioritize growth first, to take care of the needs of our people rather than going back to that number. It is not crucial to return to 39, we need to prioritize our growth and the needs of Filipinos,” Diokno said.
Diokno said the goal is to just bring down the debt ratio below the international threshold of 60 percent.
“Right now, national debt to GDP ratio as we expect it to be around 61.8 percent. It will be back to 61.3 percent by 2023 and then go down to 60.6 percent by 2024, and then 59.3 percent by 2025, 57.7 percent by 2026 and 2027 to 52.5 percent,” Diokno said.
“In other words, by the end of the Marcos years, we expect that national debt to GDP ratio to be below 60 percent,” he added.
According to Diokno, debt level of above 50 percent is not detrimental, citing the current global debt to GDP ratio is somewhere between 200 percent and 300 percent.
“This kind of debt structure has nothing to worry about. This is one of the lowest among even emerging economies,” Diokno said. “Skies are not falling because our GDP ratio is 62 percent.
As of end-May 2022, the national government’s debt stock stood at P12.495 trillion.
“The way out of this is by growing at a faster rate, we have simply outgrown our debt, most of our debt, incidentally, our medium to long term,” Diokno said.
Since 2019, the total debt of the national government ballooned from just P7.731 trillion, or 39.6 percent of GDP.
Last April, former Finance Secretary G. Dominguez III said the new administration should avoid accumulating additional debt and prioritize policies that will entice more economic activity.