When Rodrigo Duterte assumed the presidency, the Philippines had a national debt of 6.6 trillion Philippine pesos. This amount was accumulated over previous administrations, including those of Gloria Macapagal-Arroyo, Benigno Aquino III, Joseph Estrada, and Fidel Ramos, among others. However, by the end of Duterte’s six-year term, the national debt had surged to over 13.8 trillion pesos, effectively doubling the debt incurred before his presidency. This significant increase in borrowing has become a central point of controversy, with many accusing Duterte of plunging the Philippines into massive debt. Some officials in the current administration under President Bongbong Marcos have even criticized Duterte’s economic policies, attributing the financial burden to his tenure.
Presidential Adviser on Poverty Alleviation, Larry Gadon, has highlighted the difficulties the Marcos administration faces in managing this enormous debt, which ballooned due to the previous administration’s heavy borrowings. Gadon pointed out that it took 89 years and 14 presidents, from Manuel L. Quezon to Benigno Aquino III, to accumulate 6.6 trillion pesos in debt. In contrast, the Duterte administration borrowed a staggering 7.2 trillion pesos in just six years.
This raises the question: did Duterte’s tenure leave the Philippine economy heavily burdened with debt? And will Filipinos now bear the responsibility of repaying this debt in the future? This debt will eventually need to be repaid, and the primary means of doing so is through taxes. But is this necessarily a bad thing? To understand the implications, it is essential to examine how Duterte’s administration pushed the national debt to unprecedented levels.
When Duterte took office, he promised significant infrastructure development. However, infrastructure projects are not cheap; they require substantial investments, often funded by debt. Duterte’s administration relied heavily on borrowing to finance these projects, both from domestic and international sources. The government’s revenue, primarily derived from taxes, was insufficient to cover the costs, leading to a fiscal deficit. A fiscal deficit occurs when a government’s expenditures exceed its revenues. Under Gloria Macapagal-Arroyo’s administration, the fiscal deficit hovered around -3%, meaning the government was spending 3% more than it earned. During Benigno Aquino III’s presidency, the fiscal deficit was reduced to -0.8% by 2015, leading to a decrease in the national debt and a reduction in the debt-to-GDP ratio from 74.4% in 2004 to 45.4% in 2014.
However, when Duterte took office, it was anticipated that the fiscal deficit would be maintained at around -2%. Instead, the deficit increased to 3.2% from 2018 to 2019. In 2019, just before the COVID-19 pandemic, the Duterte administration borrowed over 1.1 trillion pesos, with 906 billion pesos from domestic sources and 282 billion pesos from foreign sources. Despite this borrowing, the debt-to-GDP ratio did not initially increase; in fact, it fell to 34.1% in 2019.
The COVID-19 pandemic, however, dramatically changed the situation. Without the pandemic, the debt-to-GDP ratio was projected to decrease to 39% by 2022. Instead, it rose from 39.6% in 2019 to 54.5% in 2020, and continued to increase over the following two years.
So, is the massive debt solely due to the COVID-19 pandemic? Not entirely. While many critics blame the pandemic, there were other factors at play. Duterte’s administration faced criticism for its handling of the pandemic, with many arguing that its spending priorities were misplaced. Presidential Adviser Larry Gadon and other analysts pointed out issues such as the trillions spent on anomalous procurement, including controversial purchases of Pharmally vaccines and remdesivir.
In 2021, a Senate probe was launched into these irregularities. The investigation revealed corruption allegations following the release of the 2020 audit report by the Commission on Audit (COA). The report highlighted numerous deficiencies in the Department of Health’s (DOH) management of funds allocated for the pandemic response, leading to a contentious debate among top officials.
The COA report flagged irregularities in the handling of approximately 67.3 billion pesos of public funds intended for COVID-19 response. Of the 77 billion pesos allocated, deficiencies such as unobligated and undisbursed funds hindered the DOH’s efforts to manage the pandemic effectively. Health Secretary Francisco Duque reported that 6.4 billion pesos had been released for hazard duty pay and special risk allowances (SRA) for healthcare workers during the first period from September to December 19, 2020. However, for the second period, only 6.93 billion pesos of the 9.02 billion pesos budget for SRA had been distributed, raising concerns about the validation process for eligibility.
The investigation also uncovered that the PS-DBM awarded an 8.68-billion pesos contract to Pharmally Pharmaceutical Corporation, a start-up with a paid-up capital of only 625,000 pesos. Senators were alarmed by the high prices paid for supplies from Pharmally compared to other bidders. Concerns about possible premeditated corruption were raised, suggesting that the government could have saved billions through more competitive bidding processes.
The Pharmally scandal is regarded as one of the worst in Philippine history, and many government officials have blamed Duterte’s administration for it. Despite the scandal, Duterte continued to defend the company. When a senator revealed that Duterte transferred 47 billion pesos and cursed those who exposed the scandal, it further fueled public outrage.
In addition to the Pharmally scandal, there were other issues that were not as widely covered by the media. Surprisingly, Duterte even urged the Commission on Audit to “stop flagging” potential misuse of government funds. He specifically asked state auditors to stop publishing their reports, claiming that doing so would unjustly tarnish government agencies with “perceived corruption.” This request was condemned as a “blatant cover-up” of corruption, with critics arguing that it violated the Constitution, which mandates the COA as an independent body responsible for auditing all government expenditures to prevent “irregular, unnecessary, excessive, extravagant, or unconscionable” spending.
So, is this situation detrimental to the Philippines? It is true that the Marcos administration is now burdened with significant debt. The Philippine debt burden in 2024 amounts to over 670 billion pesos, which means the government has to allocate this amount solely for interest repayments. This 670 billion pesos could have been used for infrastructure projects, but due to issues related to the COVID-19 pandemic and the misuse of public funds, it was not.
While the situation may seem dire, the Marcos administration has plans to bring the debt down. By 2028, the debt-to-GDP ratio is projected to decrease to 50%. The strategy is not to reduce borrowings but to grow the Philippine economy. If the economy grows faster than the rate of borrowing, the debt-to-GDP ratio will decline.
Another factor to consider is that much of the Philippine government’s debt is borrowed domestically. This means that in the event of a crisis, the government could theoretically print money through the central bank to pay down the debt. The real problem arises when debt is borrowed from foreign countries, which is not the case for the majority of the Philippines’ debt.