The Philippine government may soon be forced to confront tough fiscal trade-offs as national debt levels move further beyond what economists consider sustainable, a former Bangko Sentral ng Pilipinas (BSP) official warned.
Diwa Guinigundo, BSP deputy governor for monetary policy and operations until 2019, said the country’s debt-to-gross domestic product ratio has already breached the widely accepted 60 percent ceiling, based on the latest national government debt data.
“The sustainable threshold is 60 percent of GDP. We have already breached that, and by November it was at 63 percent,” Guinigundo told radio station DZMM on Friday. He is now a member of the advisory panel of the ASEAN+3 Macroeconomic Research Office.
National government debt has climbed to P17.65 trillion as of November, up sharply from P16.05 trillion in November 2024 and more than double the P7.73 trillion recorded in 2019, just before COVID-19 pandemic wreaked havoc on the economy. The surge reflects heavy borrowing to fund emergency spending and broader economic support during and after the health crisis.
While debt expansion helped cushion the economy from the pandemic shock, Guinigundo said that restoring fiscal space will require difficult policy decisions. Options include raising taxes, improving revenue collection, or cutting public spending—choices that become more constrained as political resistance grows.
He acknowledged that new tax measures are unlikely in the near term, calling them politically unacceptable under current conditions.
Instead, Guinigundo pointed to structural fixes: lifting tax effort, currently at about 14 to 15 percent of GDP, and reining in government spending, which he said remains elevated at 22 to 24 percent of economic output.
The former BSP deputy governor said that plugging leakages in tax collection and curbing inefficient spending can make a meaningful difference.
Beyond fiscal math, Guinigundo stressed governance reforms, urging stronger action against corruption not only in revenue agencies but also in project implementation, to prevent the dissipation of public funds.
His warning comes as markets keep a close watch on fiscal discipline amid higher global interest rates, leaving policymakers with narrowing room to maneuver if debt levels continue to rise.
