Indebtedness

If Vice President Sara Duterte intends to sustain her verbal war of attrition against the Marcos administration, she should improve her grasp of fiscal policy issues.

Recently, in the course of a global tour to rally support from overseas Filipinos, Sara touched on the country’s mounting indebtedness. With our outstanding debt now exceeding P16 trillion, Sara railed: “At ‘yan ang mamanahin ng future generations of Filipinos… Budget na hindi mo alam kung saan ginastos.”

Raising concern over our country’s mounting debt is valid. But it will not be accurate to suggest that the large debt burden is entirely the responsibility of the current administration. The P16-trillion public debt is the balance of all the nation’s borrowings since independence.

Former president Rodrigo Duterte oversaw the largest chunk of our public borrowing. His administration added P6.84 trillion to our indebtedness.

To be fair, a large part of the Duterte debts was incurred to fund our effort to fight the Covid-19 pandemic and save Filipino lives. In the emergency procurements that happened while the pandemic raged, however, some issues may be raised about propriety and transparency.

A second major segment of the Duterte debts went to fund the “Build, Build, Build” infrastructure programs. Building infrastructure is a necessary investment to enable future growth that will, in turn, enable our economy to outgrow the debt.

When President BBM took office, he inherited P12.79 trillion in debt obligations. Half of that is attributable to borrowings undertaken during the Duterte years.

With our public debt now exceeding P16 trillion, the BBM administration is on track to surpass the record borrowing of the Duterte administration. The sustained borrowing cannot be excused on the ground of a pandemic. Nor is the new borrowing heavily directed towards infra investments to improve our domestic economy’s capacity for growth.

It should be more appropriate to raise an issue over the expansion of the various “ayuda” programs. These programs do not add to our economy’s future growth capacity. This is populist spending: buying present popularity while burdening future generations. When our legislators commandeered the 2025 national budget in aid of reelection, this trend becomes more ominous.

The biggest allotment in our budget goes to servicing our debt. Because we automatically allocate debt service as a method to keep borrowing costs down, we manage to skirt around the constitutional dictate to allocate the biggest budget share to education.

By the latest numbers, our debt-to-GDP ratio has hit 60.2 percent – slightly exceeding the normative prudential limit. That is not necessarily a cause of alarm. Countries like the US and Japan are doing fine despite their debt exceeding their GDP.

Our economic managers are confident that better revenue collection and tighter fiscal management will bring down that ratio to 56.3 percent by 2028. We hope they are right. Or else the debt becomes a real drag on our growth.

Magnets

Shortly before agreeing to a ceasefire, Iran fired a volley of missiles at the sprawling US Air Force base in Qatar.

Since the attack was merely performative on the part of Iran, they duly alerted the Qataris about the incoming barrage. All the missiles were intercepted and no one was hurt. Ironically, Qatar played a key role in brokering the Iran-Israel ceasefire.

This is not the first time America’s enemies attacked US military facilities in a third country. Nor will this be the last. This is a good time to reflect on warnings that the increased presence of US military assets in Philippine military camps could become magnets for attack from America’s enemies.

Last year, after the conclusion of joint military exercises, the US military left behind a missile launching system. Beijing objected to what appears to be a semi-permanent placement of a medium-range missile system. Neither Manila nor Washington was moved by Beijing’s protests. The Americans, in fact, propose to place yet another missile system in the Philippines should Manila agree.

Earlier this year, without the Philippines asking, the US approved the sale of $5.6 billion in F-16 fighter jets to the country. Our defense officials prematurely celebrated this development – until they realized the deal would be financed by the US itself through a long-term loan. The American defense secretary even visited Manila to boast about “US support” to the country.

The sale of these fighter jets has since become a joke in the region. The F-16 is obsolete. It is being replaced by the more advanced F-35. Like a used car salesman, the Pentagon wants us to buy seriously outclassed fighter planes they want to dispose of – at a cost larger than our education budget.

This happens as the world witnessed the power of state-of-the-art Chinese fighter planes engaged during the brief skirmish between India and Pakistan. Should hostilities break out in this part of the world, the F-16s will be like Volkswagen Beetles racing against Lamborghinis.

Washington takes us for fools. After the US withdrew its strategic forces from the first island group facing China, they now want us to buy obsolete defense equipment. We will be meat for the meat grinder.

We are already an oddity in our region, pledging allegiance to a fading superpower while all our neighbors conduct strategic economic diplomacy with the rising regional economic dynamo – limiting our long-term economic options. We do this even as the Trump administration tries to round up undocumented Filipinos and dump them on third countries such as Libya.