How would you feel if the government were to borrow some of your hard-earned savings from the banks? Well, generally, banks do not take your feelings into consideration.

In reality, they are allowed to utilize the savings of their depositors, which are sitting idle in their vaults, and invest them.

One way banks accomplish this is by lending portions of those deposits to the government for a specific period of time and at an agreed-upon interest rate. And the amount is not insignificant.

As of June 2023, approximately P9.7 trillion of the national government's P14.15 trillion debt is borrowed from the Filipino people.

Contrary to popular belief, the Philippine government does not owe a significant amount to the World Bank.

Data from the Department of Finance revealed that the Philippines has only borrowed around P724.4 billion from the World Bank through its lending unit International Bank for Reconstruction and Development. The lender's share against the total debt is only 5.1 percent.

But how did some of Filipino’s savings end up in the government’s pockets

Financial institutions, including banks, insurance companies, and state-run pension funds, invest portions of the money entrusted to them by their members in government securities or bonds.

Government securities are like loans given to the government by individuals or organizations, with the promise of repayment and interest. These are often seen as safe investments.

National Treasurer Rosalia De Leon, the person in charge of handling state coffers, explains that banks and other financial institutions invest in government bonds because they provide steady returns and help protect the money they have.

She also said that these investments are considered reliable because the chances of the government not repaying are low compared to other types of investments.

Although the Philippines has not failed to repay its loans, there was a period in 1983 when the government and its creditors agreed to extend the time for repayment. This happened because the old central bank did not have enough foreign currency to pay back the loans.

Considering the current economic climate, the chances of the government defaulting on its debt are minimal. Unlike in 1983, the majority of the government's debt today is in the local currency (peso), with foreign obligations accounting for only about 32 percent.

De Leon said this composition of debt provides the government with more stability and less vulnerability to factors that could lead to unpredictable or volatile debt repayments.

As a result, she said the government is better positioned to manage its debt repayments and maintain a steady financial outlook.

“If you have money in a bank and a portion of that money is invested in government bonds, you don't need to be too worried,” a bank executive, who preferred to remain anonymous, reassured.

“Government securities are generally seen as safe investments because the government is responsible for repaying the debt,” the official added.

Aside from that, bank depositors are protected by the Philippine Deposit Insurance Corp. (PDIC), which guarantees deposits up to P500,000.

“This deposit insurance ensures that a certain amount of deposits is guaranteed, even in the event of a bank failure or default,” the bank official concluded.