Philippines Faces Record Debt: ₱21.48 Trillion by 2027 Amid ₱7.2 Trillion Budget

Philippines Faces Record Debt: ₱21.48 Trillion by 2027 Amid ₱7.2 Trillion Budget

By TheNATIONWEEK.com News Desk | October 12, 2026

MANILA, Philippines – The Philippine House of Representatives has approved an unprecedented ₱7.2 trillion national budget for 2027, a fiscal move that will elevate the nation’s outstanding debt to a staggering ₱21.48 trillion by the end of the year. The budget’s passage on October 7, 2026, was marked by visible emotion from House Committee on Appropriations Chairperson Rep. Mikaela Suansing, highlighting the significant implications of these financial commitments.

This projected debt figure represents an 8.7% increase from the anticipated ₱19.77 trillion at the end of 2026 and an 11.6% rise from ₱17.71 trillion recorded at the close of 2025.

The government’s 2027 borrowing strategy outlines a plan to raise ₱3.3 trillion in gross borrowings, a 21% increase from the ₱2.73 trillion allocated for the current year. This substantial borrowing will account for 46% of the newly proposed national budget. Domestic sources are expected to provide 72% of these borrowings, totaling ₱2.39 trillion, a 24.5% increase from 2026. External borrowings are projected to reach ₱914.98 billion, an increase of 12.2%.

Analysis of the borrowing plan reveals a critical shift: a significant portion of the increase is driven by rising debt repayments rather than solely new financing needs. Principal amortization is expected to soar by 51.5% to ₱1.59 trillion in 2027 from ₱1.05 trillion in 2026. This ₱540.6 billion increase in repayments constitutes approximately 95% of the total ₱570.1 billion rise in gross borrowings, indicating a tightening fiscal squeeze. Consequently, net financing, which excludes principal repayments, is projected to see a modest 1.8% increase to ₱1.71 trillion.

Economic Sustainability at Risk

Economists are expressing serious concerns about the long-term implications of these escalating debt levels. Ruben Carlo O. Asuncion, Chief Economist at Union Bank of the Philippines, emphasizes that while borrowing is essential for both new expenditures and refinancing maturing obligations, the sustainability of this debt depends on robust economic growth, strong revenue performance, and the government’s ability to reduce its fiscal deficit.

“While the debt stock is projected to reach a record level in nominal terms, debt sustainability is better assessed relative to the size of the economy,” Asuncion cautioned. “The key challenge is ensuring that debt grows more slowly than the economy over the medium term and that rising interest costs do not crowd out productive spending.”

The government forecasts revenues to increase by 8.3% to ₱5.21 trillion in 2027, with disbursements rising by 6.7% to ₱6.9 trillion. This leads to a projected budget deficit of ₱1.695 trillion, a 2.2% increase from the revised ₱1.659 trillion ceiling for 2026. Despite the nominal increase, the deficit’s share of Gross Domestic Product (GDP) is expected to slightly narrow from 5.4% to 5.1%.

These projections emerge amidst a weakening economic landscape. Philippine GDP expanded by a mere 2.3% in the second quarter of 2026, bringing first-half growth to 2.6%, attributed to subdued public construction and household spending.

Jonathan L. Ravelas, Senior Adviser at Reyes Tacandong & Co., underscores that the critical factor is not merely the size of the debt, but whether these borrowings effectively stimulate economic growth, generate employment, and boost tax revenues. “If economic growth outpaces debt accumulation, the fiscal position remains manageable,” Ravelas noted. “Otherwise, fiscal pressures could build over time.”

Alarming Debt Trajectory

The National Government’s (NG) outstanding debt reached ₱19.07 trillion at the end of June 2026, a 2.8% increase from the previous month and a 10.41% year-on-year rise. This pushed the debt-to-GDP ratio to 66% in the second quarter, its highest point since 2004.

More recently, the Bureau of the Treasury reported the national government’s outstanding debt hitting a record high of ₱19.61 trillion as of August 31, 2026. This figure represents a 1.12% increase from July and a 10.72% year-to-date rise. Domestic debt constitutes 67.53% of the total at ₱13.24 trillion, primarily due to net government securities issuances. External debt, making up 32.47% at ₱6.37 trillion, was largely influenced by the peso’s depreciation against the US dollar and net foreign loan availments, with the peso trading at approximately 62.209 to the US dollar during the period.

Economic managers anticipate the debt-to-GDP ratio to settle around 64.9% for the year, remaining stubbornly above the 60% international threshold often considered ideal for developing economies. The nation’s escalating debt, coupled with the approval of this substantial budget, sets the stage for intensified scrutiny on fiscal management and the trajectory of economic performance in the coming years.

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