FINANCE Secretary Benjamin Diokno said they expect the national government’s debt as a share of the economy to be reduced to 52.5 percent—within the internationally accepted threshold—by the end of the Marcos Jr. administration in 2028.
Speaking in a press conference following the meeting of the Cabinet-level Development Budget Coordination Committee (DBCC) on Friday, Diokno said the national government’s debt-to-GDP ratio will start to taper down next year coming from 61.8 percent this year.
“In other words, by the end of the Marcos years, we expect the national debt-to-GDP ratio to be below 60 percent which is the old threshold,” Diokno told reporters after DBCC’s first meeting under the Marcos administration.
While the debt-to-GDP ratio this year is seen to breach the 60-percent threshold, Diokno reiterated that this is not a cause for concern, adding that this is one of the lowest for emerging economies.
“That’s really nothing to worry about. The way out of this is by growing at a faster rate. We have to simply outgrow our debt,” he added.
However, Diokno said they are not rushing to bring back the country’s debt-to-GDP ratio to the record-low pre-pandemic level of 39.6 percent in 2019.
The finance chief argued that the best way to reduce the debt ratio at this time is to support the country’s economic growth in a bid to also raise revenues.
“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 rather than going back to that number. As I said, it’s not crucial that we revert to 39 [percent]. We must prioritize growth and the needs of the people, of Filipinos,” he said in a mix of English and Filipino.
Apart from supporting the country’s economic growth, Diokno has since said they plan to raise revenues through improving the tax administration, imposing taxes on digital services, single-use plastics, and carbon emissions, among others.
He expressed confidence that these measures would be enough to raise the needed revenues for the country to outgrow its debt.
To reduce the impact of the currency fluctuations on the country’s debt, Diokno said they also plan to increase the share of the national government’s domestic borrowings to 80 percent of the total, higher than 75 percent previously.
For this year, the government had set to borrow a total of P2.2 trillion.
As of end-May, the national government’s outstanding debt dipped to P12.5 trillion from a record-high of P12.76 trillion as of end-April, due to its repayment of a P300-billion short-term, zero interest loan from the Bangko Sentral ng Pilipinas.
The national government’s debt-to-GDP ratio as of the first quarter of the year rose to 63.5 percent, the highest since the country’s debt as a percentage of the economy hit 65.7 percent in 2005 under the Arroyo administration.