Philippines: Swelling debt to slow economic momentum

MANILA, Philippines — The Freedom from Debt Coalition (FDC) said the country’s record-high P11-trillion debt would make it difficult to revert the economy’s momentum to its pre-pandemic levels.

In a forum hosted by the non-profit Freedom from Debt Coalition (FDC), former senator Wigberto Tañada said servicing the huge debt pile may restrict the next administration’s spending for social services as policymakers increase the budget for debt payments.

“The government now spends at least 35 percent to 40 percent of our budget for debt servicing. How can an economy sunk in paying debts recover from the pandemic?” Tañada said.

Prior to the pandemic, the government closed 2019 with a debt stock of P8.22 trillion. However, borrowings during the health crisis have widened outstanding debt by nearly P3 trillion, to an all-time high of P11.07 trillion as of end-May.

Tañada said the government fast-tracked its debt accumulation, but failed to mitigate the economic impact of the pandemic despite the funding.

“The government added P2 trillion in our outstanding debt, but we have yet to see any sign that our people are recovering from the pandemic,” the former lawmaker said.

In labor, for instance, at least 408,000 workers returned to their jobs in May after the lockdown was lifted in Metro Manila and nearby provinces, but about 3.73 million Filipinos remain unemployed in the face of recession.

The Philippines also faces another threat on the medical front with the confirmed transmission of the Delta variant. Last Friday, the Department of Health reported that 16 people have tested positive for the highly transmissible variant, of which 11 acquired the virus within the country.

FDC president Rene Ofreneo said the end of the pandemic appears to be nowhere in sight with the spread of new variants and threats of resurgence. With this, he called on the government to come up with recovery efforts that can be supported by available resources so as not to expand the debt stock further.

According to the Bureau of the Treasury, the government increased its debt servicing by around 22 percent to P623.59 billion from January to May, from P512.96 billion during the same period last year.

For 2021, the government plans to expand its borrowing program to P3.02 trillion as it imports vaccines and bankrolls pandemic measures to contain the spread of the virus.