Understanding the Debt Debate: What Does the Philippines Owe?

Focus Keyword: Philippines national debt

In recent discussions surrounding the Philippines’ national debt, two government officials presented oversimplified views that went viral but lacked financial clarity. Senator Sherwin Gatchalian stated that each Filipino “owes” around P142,000, while Finance Secretary Ralph Recto countered this by suggesting that this debt translates to “P140,000 in savings” since most debt is held domestically.

Breaking Down the Claims

Both claims contain a kernel of truth but are misleading. Let’s unpack them.

The Debt Per Capita Misconception

When discussing national debt, dividing it by the population can indeed produce alarming figures. However, sovereign debt doesn’t work like personal debt; countries service their obligations through national income, taxes, and refinancing—not by sending bills to every citizen.

Real Metrics: Economists emphasize the importance of debt-to-GDP ratios, interest-to-GDP, and interest-to-revenue ratios. These metrics provide a clearer picture of a country’s financial health than simplistic per-capita comparisons.

Current Debt Situation in the Philippines

As of the end of 2024, the national debt was P16.05 trillion, approximately 60.7% of GDP. This ratio increased to 63.1% by the mid-2025, marking the highest since 2005. Yet, it remains aligned with an investment-grade assessment.

According to Moody’s, which evaluates credit risk, the Philippines retains a Baa2 rating with a stable outlook. The agency forecasts a GDP growth of 5.7% in 2025, fueled by robust consumption and public investment—though it cautions on upcoming debt affordability challenges.

The Cost of Servicing Debt

In the 2025 budget alone, the government allocated P876.7 billion—nearly 14% of the total budget—specifically for servicing both domestic and foreign debts. Among these, foreign debt presents a more considerable challenge since repayments require hard currencies, making them susceptible to exchange rate fluctuations.

The Role of Gross International Reserves (GIR)

The Philippines’ Gross International Reserves (GIR) act as an economic buffer, standing at $105.9 billion as of August 2025. These reserves can cover 7.2 months of imports, providing confidence in meeting external obligations.

The BSP highlighted Moody’s positive outlook, noting the Philippines has sufficient reserves to handle external shocks—defending the peso and ensuring manageable debt service levels.

Economic Growth vs. Debt Sustainability

The question isn’t simply how much each Filipino “owes,” but whether the economy is growing sufficiently to outpace debt growth. According to research from the Philippine Institute of Development Studies, the country needs consistent growth above 6% to bring its debt-to-GDP ratio below 60% by 2028. Recent trends following the pandemic show less than promising growth rates, posing a risk to debt sustainability.

Domestic Debt and Perceived Savings

Recto’s claim of P140,000 representing a form of savings isn’t entirely out of context. With approximately 69% of the national debt owed to domestic creditors, one could argue that interest paid on debt returns to Filipino accounts. However, this perspective oversimplifies the issue.

The Reality of Government Securities

While government institutions like the Social Security System (SSS) and the Government Service Insurance System (GSIS) hold substantial amounts of government securities, these investments yield lower returns. SSS’s financial statements indicate its government securities account for about 60% of its assets, emphasizing the importance of safety over yield.

Risks and Returns for Pension Funds

SSS and GSIS invest heavily in government debt, often due to mandates and perceived safety. However, the low returns associated with government bonds create challenges in meeting long-term obligations, leading these funds to seek higher-yielding investments elsewhere.

Conclusion: The Bigger Financial Picture

To summarize, the Philippines’ approach to debt must be viewed through a broader economic lens. Sustainable debt management isn’t merely about startling figures or claims of “savings.” It’s essential to examine whether economic growth continues to outstrip interest payments and whether the government can steadily reduce its budget deficit.

The deeper implications of the national debt need more profound scrutiny, steering the discourse away from sensational statements and towards a more comprehensive understanding of fiscal health.

This article aims to provide a clear and engaging guide to the complexities of the Philippines’ national debt. Understanding the nuance and context will help Filipinos navigate the financial landscape more effectively.

For a comprehensive discussion on personal finance and other financial topics, visit Finterest, a series by Rappler aimed at demystifying money management.