BY HERMAN M. LAGON
THE EFFECT on our debt burden is palpable, with the Asian Development Bank (ADB) estimating that corruption drains around 1-2% of our GDP annually. Such misuse of funds exacerbates the debt situation, forcing the government to borrow more to plug fiscal gaps. For the average Filipino, these scandals fuel frustration, as they see a government that borrows on their behalf, only to let funds slip through the cracks of corruption.
Fitch Ratings and the WB have issued cautious outlooks on the Philippines, noting a global surge in debt vulnerabilities, especially for developing countries. The surge in interest rates has compounded these vulnerabilities as debt-servicing costs rise and new loan commitments dwindle. With fewer options for refinancing, our nation faces the challenge of managing debt without falling into the trap of perpetual borrowing. Future generations may bear this burden if policymakers fail to adopt a more prudent approach to debt management.
Reducing the debt-to-GDP ratio is achievable but demands a shift in how we generate and allocate funds. Former Finance Secretary Gary Teves suggested bolstering tax collection, particularly through reforms targeting low-efficiency tax areas. Aside from the efficiency and reliability in tax collection, proposed taxes on digital services and single-use plastics could also help, but more is needed to bridge the revenue gap. For now, engaging in public-private partnerships (PPP) and privatizing certain government assets are the quickest solutions. San Miguel Corp.’s recent bid to improve the Ninoy Aquino International Airport is a promising example, offering upfront payments that could reduce debt reliance.
A crucial part of tackling debt is addressing spending inefficiencies, especially the military and uniformed personnel (MUP) pension scheme, a system currently threatening to spiral out of control. MUP pensions stand at an unsustainable PhP 5.58 trillion, nearly equivalent to the 2024 national budget. Without reform, these obligations will continue to drain public resources that could be better invested in public welfare projects. It is time for Congress to revisit this system with equity and sustainability in mind.
Debt-driven policies may once have seemed necessary to accelerate development, but they have now led to a cycle of dependency that benefits few. To foster genuine progress, the country must revisit its priorities, taking lessons from its debt-ridden past. We need policies that generate local employment and lessen import reliance, especially on staples. A diversified economy, with industries resilient enough to weather global downturns, could better withstand external pressures and reduce the need to borrow.
The road to debt reduction is challenging but essential. In many ways, it mirrors the values of responsible stewardship—a commitment to manage today’s resources with future generations in mind. This stewardship demands sacrifice, transparency, and, above all, accountability. We must stay vigilant and hold our leaders accountable, pushing for a system that treats debt responsibly rather than risking our future for quick fixes.
If we continue down this path, future generations may look back and wonder why we did not make better choices when we had the chance. Reducing debt is not just about balancing the books; it is about ensuring that tomorrow’s Filipinos are not left with a burden they did not choose. A national commitment to breaking free from debt dependence is needed now more than ever.
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Doc H fondly describes himself as a “student of and for life” who, like many others, aspires to a life-giving and why-driven world grounded in social justice and the pursuit of happiness. His views do not necessarily reflect those of the institutions he is employed or connected with./PN
