[Finterest] Why you don’t owe P142,000 in nationwide debt – or have P140,000 in ‘financial savings’

MANILA, Philippines – What occurs when two authorities officers attempt to oversimplify nationwide debt? You get two viral, however not financially sound, soundbites: that each Filipino “owes” round P142,000, and that that is mainly “P140,000 in financial savings” as a result of most authorities debt is held at house.

Each strains comprise a grain of reality however a bushel of confusion. Let’s begin with the info first. On September 2, as lawmakers started deliberating on the 2026 nationwide funds, Senator Sherwin Gatchalian warned that “every Filipino now owes about P142,000” due to the federal government’s mounting debt, including that the Marcos administration might finish its time period with the very best debt accumulation in historical past.

Finance Secretary Ralph Recto countered with a special spin: “Then again, you would additionally say that you’ve got P140,000 in financial savings. As a result of one man’s legal responsibility is one man’s asset.” He additional defined that the quantity was in “your pension funds, it’s invested by GSIS, invested by SSS, invested by PhilHealth, invested by Pag-IBIG. So sa atin ‘din napupunta ‘yung 70% (So the 70% goes to us too).”

There’s so much to unpack in these two statements. Whereas they’re not each totally mistaken, they’re gross oversimplifications that pass over quite a lot of vital factors.

Let’s consider debt correctly

Begin with the per-capita gimmick. Dividing the nationwide authorities’s debt by the inhabitants makes for an alarming quantity, nevertheless it’s probably not how sovereign debt works. Nations don’t settle obligations by sending each citizen a invoice. They service debt over time by sources of nationwide earnings, taxes, and refinancing.

Should you ask an economist, the helpful metrics are the system-level ratios: debt-to-GDP, interest-to-GDP, and interest-to-revenue. In different phrases, what issues is the general image of how the economic system is rising relative to debt, not what number of residents you’ll be able to divide your debt by.

So how does that search for the Philippines? By end-2024, nationwide debt stood at P16.05 trillion, about 60.7% of GDP. By finish of Q2 2025, that ratio had risen to 63.1% with complete debt at P17.27 trillion. That’s the very best since 2005, however nonetheless per an investment-grade profile.

Simply ask Moody’s. Credit standing companies like Moody’s, S&P, and Fitch are handled by international traders and international governments because the supply of reality for the danger and creditworthiness of whole nations. And excellent news, the Philippines has held its floor: in its newest assessment, Moody’s affirmed the nation’s Baa2 ranking with a secure outlook.

The company famous that development momentum remained comparatively sturdy, projecting 5.7% GDP development in 2025 on the again of resilient consumption, remittances, and public funding. Nevertheless, it additionally warned that debt affordability will stay pressured within the close to time period as increased funding prices filter by. Moody’s expects this to step by step enhance as soon as international charges ease and development returns to its long-term development.

That brings us to the price of paying debt and the buffers that shield the economic system. For 2025, the federal government has put aside about P876.7 billion — nearly 14% of your entire funds — simply to cowl funds on each home and international loans. Of the 2, international debt poses the larger threat. As a result of it should be repaid in {dollars} or different laborious currencies, a weaker peso or tighter international credit score can shortly make it dearer to service.

That is the place the Philippines’ gross worldwide reserves (GIR) are available in. Consider them because the nation’s emergency fund: they’re foreign-currency belongings held by the Bangko Sentral ng Pilipinas (BSP) that can be utilized to pay for imports, stabilize the peso, or cowl exterior debt when markets flip tough.

As of August 2025, GIR stood at $105.9 billion, boosted by increased gold costs and funding earnings, which is sufficient to pay for 7.2 months of imports and canopy 3.4 instances the nation’s short-term exterior debt. What this implies is that the nation has sufficient out there international trade to satisfy any steadiness of funds financing wants in excessive situations.

The BSP additionally welcomed Moody’s optimistic evaluation, stressing that the Philippines has “ample reserves and coverage area to soak up exterior shocks.” In sensible phrases, this implies the nation has a large cushion to maintain paying its international money owed and to defend the peso, stopping the debt service burden from ballooning simply due to foreign money swings.

To place all this extra merely, sustaining our debt doesn’t rely upon a scary debt-per-person determine however on whether or not the economic system grows sooner than our curiosity funds, and whether or not the federal government succeeds in steadily shrinking its funds deficit.

Quite than how a lot every Filipino “owes,” the actual query we must be asking is: can the Philippines develop quick sufficient to beat its debt? Philippine Institute of Growth Research senior analysis fellow John Paolo Rivera estimated earlier this 12 months that the nation would wish fixed financial development above 6% if it needed to fall under the 60% debt-to-GDP mark by 2028. Put up-pandemic, the one time the Philippines hit an annual GDP development increased than 6% was in 2022. This isn’t promising, and Rappler’s resident economist JC Punongbayan warns that sluggish development might “spell doom for PH’s debt.”

Can we owe cash to ourselves?

What about Recto’s “P140,000 in financial savings” spin? The logic goes like this: each legal responsibility is another person’s asset, and since most of our borrowing is finished at house, the curiosity we pay largely leads to Filipino pockets.

There’s some reality there. At mid-2025, about 69% of the nationwide authorities’s debt was owed to home collectors, and policymakers have signaled they intend to maintain counting on the native market. However that doesn’t imply the debt is free. The taxes used to pay curiosity nonetheless go away households’ and corporations’ wallets earlier than they reappear as coupon earnings for bondholders. And like talked about earlier, international debt is far more worrisome, and that represents about 31% of the Philippines’ debt, so a piece of curiosity nonetheless flows overseas.

So how a lot of the debt do these institutional traders maintain? Let’s deal with SSS and GSIS. The Social Safety System’s personal monetary statements present authorities securities of roughly P478.4 billion at end-2024, or about 60% of SSS’s monetary belongings that 12 months. GSIS President and Normal Supervisor Wick Veloso stated about 70% of its portfolio is parked in authorities securities and different fixed-income devices, underscoring how central Treasuries are to its asset combine.

You may be questioning, why are they shopping for a lot authorities securities? Are they compelled to absorb nationwide debt? The reply is usually “no, however…” SSS is required by regulation to position no less than 15% of its fund in authorities securities, whereas GSIS has broad discretion below a “prudent-person” rule. In follow, each establishments lean closely on authorities bonds as a result of they’re protected and predictable, even when they don’t pay a lot in return.

Why native debt ≠ Filipino financial savings

Now, deal with that final half: low returns. That’s the catch with Recto’s framing. The explanation authorities bonds are enticing can also be the explanation they’re restricted. They’re protected, backed by the total religion of the Philippine state, they usually don’t swing wildly in worth. For an establishment that should be positive it might pay pensions each month, that stability is efficacious.

However low threat all the time comes at a value. Authorities bonds usually pay lower than different investments. That’s good for taxpayers, because it means the federal government isn’t paying sky-high curiosity to borrow. However it’s unhealthy for SSS, GSIS, PhilHealth and their members within the sense that low returns make it tougher to develop the funds wanted to cowl pensions, loans, and well being advantages.

That’s why these funds can’t afford to rely too closely on authorities debt. They purchase it to handle threat, to not maximize returns. To make up the distinction, they appear elsewhere: equities, property developments, infrastructure initiatives, and in additional subtle markets, non-public fairness or non-public credit score funds. These higher-yielding bets carry threat, however they’re additionally the place double-digit returns are discovered — the sorts of returns international pension funds depend on to satisfy long-term obligations.

So now, let’s suppose like an institutional investor. Pension funds like SSS and GSIS don’t put all their eggs in a single basket; they follow what’s known as asset allocation. Which means spreading cash throughout a mixture of belongings like shares, bonds, property, and personal investments to steadiness threat and return. Authorities debt is only one piece of that puzzle.

To place all this extra merely, sustaining our debt doesn’t rely upon a scary debt-per-person determine however on whether or not the economic system grows sooner than our curiosity funds, and whether or not the federal government succeeds in steadily shrinking its funds deficit.”

However on this case, it’s fairly a massive piece. Take a look at SSS’s monetary asset portfolio. On the finish of 2024, SSS held about P478.4 billion in authorities securities. Against this, its publicity to higher-return belongings was a lot smaller: solely P11.4 billion in externally managed funds and about P6.1 billion in mutual funds. Even in fastened earnings devices like bonds, the distinction is hanging: P396.1 billion in authorities bonds versus P46.2 billion in company bonds. 

It’s value asking whether or not SSS might earn far more if it solely invested much less into authorities securities and extra into the non-public sector. And take into account too — if the Philippines didn’t need to borrow a lot, would SSS and different establishments maybe be capable to make investments the cash at the moment in authorities securities into belongings with increased returns?

Keep in mind, each peso sunk into Treasury bonds is a peso not deployed into probably higher-growth belongings. That trade-off issues, as a result of whereas Treasuries stabilize threat, they don’t generate sufficient on their very own to maintain a pension system wholesome for many years. And if that is the “financial savings” Recto is referring to, most savers would need these financial savings to truly develop.

So when SSS or GSIS buys authorities bonds, it isn’t with the mindset of an bizarre investor trying to find yield. It’s nearer to parking cash safely — incomes a modest return, conserving threat low, and (since these are authorities establishments) serving to take in the nationwide debt. That’s a really completely different image from Recto’s rosy declare that our nationwide debt provides as much as “financial savings.” – Rappler.com

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