Nongovernment organization (NGO) Action for Economic Reforms (AER) is urging the government to lessen its dependence on borrowing and instead focus on sustainable and efficient ways to generate revenue, such as through health taxes.

In a statement on Monday, Oct. 20, AER voiced concern over the government’s reliance on foreign loans to finance the anti-hunger initiative and the expansion of Walang Gutom Program.

“This is a symptom of an underlying fiscal crisis fueled by populist policies that prioritized political patronage and inefficient, corruption-prone projects over the welfare of the Filipino people. Such fiscal crisis, if not addressed decisively, can slide into an economic crisis,” AER said.

The country’s tight fiscal space is limiting funding for key social programs, prompting the government to seek new sources of revenue. AER said health taxes could provide multiple benefits.

The first advantage, AER explained, is that taxing unhealthy products such as sugary drinks, alcohol, and cigarettes can raise significant revenue to help prevent a fiscal crisis. These health taxes could be directed toward nutrition and health programs, including Walang Gutom Program, while also tackling the triple burden of malnutrition—obesity, undernutrition, and micronutrient deficiencies.

AER highlighted that in the face of brazen corruption, allocating revenues specifically for nutrition helps safeguard funds from misuse, citing that the sweetened beverage tax law requires an oversight committee to closely monitor its implementation.

It added that health taxes encourage healthier lifestyles by curbing the consumption of harmful products, noting that taxing sweetened beverages can help reduce obesity, diabetes, and other related health issues.

“Health taxation is a superior alternative to foreign borrowing. Borrowing will bloat our deficit when revenues remain stagnant,” AER said.

AER also pointed out that the country’s growing debt-servicing obligations are straining its limited fiscal space and diverting funds from vital social development programs.

“The proposed 2026 national budget amounting to ₱6.79 trillion—₱1.91 trillion, or almost 28 percent—will go to debt servicing, making it the largest single expenditure item in the entire budget,” AER added.

AER estimated that the ₱45.5-billion loan for Walang Gutom’s expansion could have been funded solely through health tax reforms. Enhancing taxes on alcohol and sweetened beverages could generate additional annual revenues of at least ₱39 billion and ₱55 billion, respectively.

Moreover, AER questioned the Philippines’ investment-grade credit rating, noting the irony of being deemed creditworthy while relying on Asian Development Bank (ADB) loans to fund food aid programs.

AER emphasized that the Marcos Jr. administration’s expanded Walang Gutom Program, mentioned in his fourth State of the Nation Address (SONA), will be funded by a $400-million (over ₱23-billion) loan from the Manila-based multilateral lender ADB, €200 million (over ₱14 billion) from the French government’s aid arm Agence Française de Développement (AFD), and $150 million (over ₱9 billion) from the OPEC Fund, bringing the total financing for the Reducing Food Insecurity and Undernutrition with Electronic Vouchers (REFUEL) Project to about ₱45.5 billion.

“AER estimates that the country’s [loans} for the Walang Gutom expansion could have been already covered by reforming health taxes alone. For instance, improving taxation on alcohol and sweetened beverages (SBs) would, at the very least, generate an additional annual revenue of ₱39 billion and ₱55 billion, respectively,” it said.

Amid the growing incidence of hunger and malnutrition in the country, AER stressed that “it is deeply alarming that programs aimed at addressing food insecurity are being financed through foreign borrowing, raising serious questions about its sustainability.”

It added that hunger continues to be a critical issue affecting millions, even as the country nears upper-middle-income country (UMIC) status.

“The fact that the Philippines has long been late in achieving such an income status and, yet, still struggles to generate its own resources to combat hunger further shows that our economy is unsound,” AER said.