The elephant in the room
As of November 2021, the Philippines’ debt stood at P11.93 trillion amid the continuous borrowings made by the Duterte administration to finance its pandemic response. This figure is expected to increase to as high as P13.4 trillion this year.
The debt-to-GDP (Gross Domestic Product) ratio has already breached the internationally acceptable threshold of 60%. The ratio measures the level of debt of a country in relation to the size of its economy. A ratio higher than the borderline will trigger a downgrade in credit ratings, making our debts more costly in terms of interest.
According to the Department of Finance, it will take until 2025 before the ratio goes down below the 60% threshold. The way to reduce the debt-to-GDP ratio is for the Philippine economy to grow 6% to 6.5% per year. The reduction is premised on the assumption that all other things are equal or the same before the ongoing war between Ukraine and Russia. Oil prices jumped as Russia invaded Ukraine, creating ripples of increasing prices in almost all commodities.
In his interviews, presidential frontrunner Bongbong Marcos Jr. said that he wants to pay the country’s debt. He promised heavy spending like creating more jobs, increasing benefits and compensation for workers, giving help to people experiencing hunger, boosting agriculture and tourism, paying debt, and many more.
On the other hand, Robredo views borrowing money as not necessarily bad for as long as it is used properly. She said this when the ratio was over 40 percent and still has elbow room for additional debts. Now that we have reached the ceiling, she said that she would “honor the commitments” made by previous administrations should she be elected to office.
Aware of the P13-trillion debt he will inherit if elected president, Moreno said he would finance his ambitious projects amid this burgeoning debt through an effective, efficient and prudent management of government resources under an open, transparent and inclusive administration.
Finance Secretary Carlos G. Dominguez III has not categorically admitted but has given enough hints that the next administration may have no other choice but to impose new or higher taxes on paying the enormous foreign debts.
If we cannot reach the growth target of 6% to 6.5% per year, how can we pay off the debt?
None of the presidential candidates dare to speak about imposing new or higher taxes, and they sugarcoat the problem with their delusional promises. This financial mess is the elephant in the room that our candidates must confront as early as today with their clear understanding of the problem and a concrete plan to prevent the country from plunging into a debt crisis.