Finance chief downplays worries over debt levels
At A Glance
- Finance Secretary Ralph G. Recto expressed confidence in the government's ability to manage its debt and reassured that the debt level, at 60 percent of the country's gross domestic product, is manageable.<br>As of November last year, the total government debt stood at P14.51 trillion.<br>Recto's statement echoes a recurring trend of finance officials downplaying the government's rising debt.
Finance Secretary Ralph G. Recto has dismissed worries about the country's ballooning debt stock, affirming the government's capability to meet all maturing financial obligations.
Recto said that the current total government debt, which amounted to P14.51 trillion as of November last year, should not be a cause for concern, as it represents only 60 percent of the country's economy, or gross domestic product (GDP).
“Today, at 60 percent, I'm not that much concerned about the national debt,” Recto told reporters on Wednesday, Jan. 24. “It's your ability to pay that is important. It's not the size of the debt, but your ability to pay.”
Recto referred to the debt ratio as “very manageable."
This is not the first instance of a finance secretary disregarding the government's increasing nominal debt.
Former Finance Secretary Benjamin E. Diokno was also unfazed by the persistent growth in debt, stating that the absolute numerical value does not provide a holistic understanding of the government’s financial condition.
Diokno explained that the public should look at the debt-to-GDP ratio, which compares the government’s total debt to the size of the country’s economy or its ability to generate income.
In 2022, the total value of all goods and services produced within the Philippines, known as the GDP, reached P22.271 trillion.
The debt-to-GDP ratio in the third quarter of 2023 was 61 percent, a decrease from 63.5 percent recorded in the previous year. This occurred despite the significant increase in the absolute amount of debt burden.
To put the debt-to-GDP ratio in terms of an ordinary person's life, Diokno suggested to think about it in relation to personal finances, and to compare someone’s own debt to his annual income.
To illustrate the point, an accumulated debt of P10 million would not be so burdensome for an individual with a yearly income of P25 million. However, it would pose a significant problem for someone earning only P5 million.
In 2022, the Philippine economy generated an output of P22.271 trillion, while its debt during that period amounted to P13.818 trillion.
Under the Medium-Term Fiscal Framework of the Marcos administration, the government has set a goal to reduce the debt-to-GDP ratio to below 60 percent by 2025, and subsequently decrease it further to 51.1 percent by 2028.