The Department of Finance (DOF) is looking into a proposal setting a debt ceiling that would determine whether the national government should increase or decrease its borrowing.

Finance Secretary Benjamin E. Diokno said the DOF will consider the International Monetary Fund's (IMF) proposal to adopt the 60 percent debt ceiling in managing the country's finances.

A debt ceiling is a maximum amount of money that the government is allowed to borrow to finance its operations. Once this limit is reached, the country must either cut spending or raise the limit to continue borrowing.

However, setting a debt cap may lead to political disputes, as lawmakers often engage in contentious debates when the limit is hit.

Financial uncertainty will also arise as the government nears its borrowing ceiling, which could rattle financial markets and erode confidence in the government's ability to manage its finances.

Additionally, hitting the debt ceiling can result in delays or defaults on government obligations, such as payments to government employees, contractors, and creditors.

As of September, the national government's debt-to-gross domestic product (GDP) ratio, a key measure of its ability to meet financial commitments, was at 60.2 percent.

In 2021, there was a proposal in Congress to set a debt ceiling at 50 percent of the country's GDP. However, the DOF opposed it because it could limit spending during crises.

Unlike the Philippines, the US and other countries have debt ceilings, but they often raise or suspend these limits to avoid the risk of defaulting on their debts.

As part of the Marcos administration's fiscal consolidation plan, the government aims to lower the debt ratio from 60.9 percent in 2022 to below 60 percent by 2025.

To achieve this target, the DOF said the government will prioritize enhancing tax administration through digitalization and modernization efforts, as well as ensuring that tax compliance is easy, efficient, and accessible.

Moreover, plans are underway to broaden the tax base by implementing several tax policies,

These include the introduction of value-added tax on digital service providers and imposing excise taxes on premixed alcoholic beverages, as well as on food and beverages with high sugar, fat, or sodium content.

Additionally, the government plans to apply taxes on environmentally damaging products and activities, such as single-use plastics and mining.