NG debt seen hitting record PHP 21.48T in 2027

The Philippine government’s outstanding debt is projected to hit a record PHP 21.48 trillion by end-2027, with higher borrowing largely driven by increased principal repayments and continued fiscal deficits, according to a copy of the 2027 Budget of Expenditures and Sources of Financing.

The debt stock is expected to rise 8.7% from the PHP 19.77 trillion projected for end-2026, which is 11.6% higher than the PHP 17.71 trillion posted at end-2025.

The government plans to raise PHP 3.3 trillion in gross borrowings next year, 21% more than this year’s PHP 2.73-trillion program. The planned borrowing is equivalent to 46% of the proposed PHP 7.2-trillion national budget.

Domestic sources will account for 72% of total gross borrowings, with domestic debt issuance projected at PHP 2.39 trillion, up 24.5% from this year. External borrowings are expected to reach PHP 914.98 billion, 12.2% higher than the 2026 program.

The increase in gross borrowing, however, is largely due to the government’s rising debt repayments rather than a sharp increase in fresh financing needs.

Principal amortization is projected to jump 51.5% to PHP 1.59 trillion next year from PHP 1.05 trillion in 2026. The PHP 540.6-billion increase in repayments accounts for about 95% of the PHP 570.1-billion rise in gross borrowings.

As a result, net financing, which excludes principal repayments, is projected to increase by just 1.8% to PHP 1.71 trillion.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the increase in debt would likely reflect continued fiscal deficits and the financing requirements of a bigger national budget.

“Borrowing is needed not only to finance new expenditures but also to refinance maturing obligations,” he told BusinessWorld via Viber.

Mr. Asuncion said the debt level remains manageable for now, but its sustainability depends on economic growth, revenue performance, and the government’s ability to narrow 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,” he said.

“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,” he added.

The government projects revenues to rise 8.3% to PHP 5.21 trillion in 2027, while disbursements are expected to increase 6.7% to PHP 6.9 trillion.

The budget deficit is projected at PHP 1.695 trillion, 2.2% higher than the revised PHP 1.659-trillion ceiling for 2026. Despite the wider deficit in nominal terms, its share of gross domestic product (GDP) is expected to narrow to 5.1% from 5.4%.

The outlook comes as economic growth has weakened. Philippine GDP expanded by 2.3% in the second quarter, bringing first-half growth to 2.6%, amid weaker public construction and subdued household spending.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the key issue is not the size of the debt alone, but whether borrowings generate stronger economic growth, create jobs and raise tax revenues.

“If economic growth outpaces debt accumulation, the fiscal position remains manageable,” he said in a Viber message. “Otherwise, fiscal pressures could build over time.”

The National Government’s (NG) outstanding debt rose 2.8% to PHP 19.07 trillion at end-June from PHP 18.55 trillion a month earlier. Year on year, the debt stock increased 10.41%.

The end-June debt level pushed the debt-to-GDP ratio to 66% in the second quarter, its highest since 2004, from 65.2% in the first quarter and 63.2% at end-2025. — Justine Irish D. Tabile, Senior Reporter