The question has been hanging in the minds of many concerned citizens. Can the country avoid a debt-driven economic implosion? Can a repeat of the horrible1981-1985 debt crisis be avoided?

As it is, the economy has been teetering on the edge of a debt abyss. The national debt “stock” has shot up to over P17 trillion. Due to the old Marcosian Presidential Decree 1177, the allocations for “automatic” debt service payments—interest and principal amortization—now average over P2 trillion annually, easily eclipsing the budgetary appropriations for education and the “guni-guni” public works projects. Half of all government revenues now go to the servicing of the debt service mountain, not to the expansion of payments for social services such as more and better health and education services and facilities.

Is debt sustainable?

It is if the economy has been growing faster than at the rate it is borrowing from domestic and foreign creditors. But it is not. The government itself has reported its failure to reduce the debt-to-GDP ratio to less than 60 per cent in 2024-25 as part of the Administration’s original 2022 list of promises. The ratio, as of the third quarter of 2025, was 63 per cent.

The keys to the reduction of the debt burden are well known: fiscal discipline, faster economic growth, and higher government revenues.

On fiscal discipline. Finance Secretary Frederick Go issued a good call to those in government: reduce unnecessary expenses and tighten the national budgetary belt. His call was unheeded. First, Malacanang allowed Congress to set aside P4.5 billion as the confidential and intelligence funds for the Office of the President. Why a huge and separate CIF for the OP when the whole bureaucracy, including the military, is literally under the control of the OP?

And then came the steadfast refusal of Congress to do away with the pork barrel system. As widely reported, Congress set aside over P200 billion as “soft pork” allocations for patronage programs such as the Medical Assistance to Indigent and Financially Incapacitated Patients (MAIFIF), Protective Services for Individuals and Families in Difficult Circumstances (AICS), Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD) and Tulong Dulong. The DPWH still retains the questionable system of “allocables” amounting to as much as half a trillion pesos. And then there is the “standby” P123 billion “shadow pork” or “unprogrammed appropriations.” The Supreme Court frowns upon UAs and have declared the transfer of funds from GOCCs such as PhilHealth to finance the UAs as unconstitutional.

Why have Secretary Go and the DOF failed to remind Congress on the critical importance of fiscal discipline in these difficult times?

On economic growth as a debt slayer, most of the forecasts are not reassuring. The unresolved flood control scandal has dampened the enthusiasm of investors, foreign and local. No less than the IMF and World Bank are predicting low and slow recovery up to 2027. The call center-BPO sector, a major life saver, is now shrinking, no thanks to the job-displacing AI. On the other hand, there is no discernible surge in OFW remittances, the economy’s leading life saver, due to the rise of anti-migrant sentiments in labor-receiving countries and worries of OFWs and their families that the unresolved politico-economic crisis in the country would wipe out their savings. As to tourism, a new growth engine, the Philippines has been falling out as a favored tourist destination in Asia due to the unresolved flood control scandal, undeveloped supportive infrastructures and high cost of moving and staying in various tourist destinations.

Finally, there is the huge cloud of economic uncertainty enveloping the Philippines and many countries due to the disruptions of the global economic order—no thanks to President Donald Trump. The US tariff war against China and the rest of the world has disrupted the flow of capital, goods and services in a globalized economic order. There are predictions on global economic cataclysms erupting this year or next.

But setting aside these predictions, the stark reality is that the Philippines is in a precarious and uncertain situation. It does not have the exportables needed by the global market. Nor does it have unlimited funds for the critical importables such as rice and oil. Moreover, the government has not revealed if it has the weapons needed to shield the country from a global recession that is now spinning into a global depression.

As to raising and collecting taxes to plug the fiscal deficits, nasa sukdulan na po. The Philippines’ 12 percent VAT on virtually all imports and goods circulated in the economy are the highest (together with Indonesia) in Southeast Asia. The country’s tax base is further eroded by the reported closure of a large number of firms in 2025, principally those engaged in real estate, BPO leasing, garments exports and service industries. It was reported that half a million registered MSMEs dropped out of the PSA list last year. To enlarge the tax base, growing the economy faster and higher is the best approach. But this is not happening.

Overall, the swelling national debt and the rising debt service burden are the direct results of weaknesses in fiscal discipline, poor economic performance of the country and natural limits on the taxability of the people in a limping economy.

To complete the picture on the deepening debt abyss, one must add here the negative impact of corrupted infra projects and the consequent failure of the government to build up solid defense against climate change risks such as floods. Debt rises because corrupt politicians and contractors keep seeking budgetary support for their “guni-guni” projects, including those with no scheduled programmed allocations. On the other hand, the consequences of “ampaw” or hollow projects are obvious: weak capacity of government to address real needs of the people, especially in strengthening the readiness of vulnerable communities to CC devastations and priming the economy for higher growth through strong and reliable infras nationwide.

To conclude, it is abundantly clear that the country is standing at the edge of a debt abyss. Escaping from the debt precipice requires a strong collective national resolve to institute real fiscal discipline, re-strategize economic development in these uncertain times, mobilize revenues without inflicting new taxes on the people, and yes, stop corrupt governance in budgetary prioritization and spending.

Are the above doable? More in the next installment.

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