Money

Your Baby Owes the Government P83,000. And So Do You

There’s a silver lining to this. 
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Long before your child is able to pay taxes, he already owes the government P83,000, which is part of the P9.05-trillion national debt incurred by the government in behalf of all Filipinos. 

On July 29, the Bureau of the Treasure announced the Philippines’ national debt due to outstanding loans breached the P9-trillion mark. If divided among the 108,771,978 million Filipinos, each would have a per capita debt amounting to exactly P83,238.35. 

Why the did the national debt balloon?

According to the Bureau of Treasury, much of the debt was incurred by the government from local investors, who loaned P6.2 trillion. The rest are from foreign lenders, who loaned P2.9 trillion to the government. Of the amount, P1.1 trillion was borrowed by the government in the first six months of 2020. 

Compared to the same period in 2019, the government borrowed P1.3 trillion more this year. The additional debt is the result of the government’s efforts to fund COVID-19 interventions, which include the purchase of PPEs, construction of isolation facilities, and compensation for government frontliners, among other things. 

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Can the government pay the debts?

The Philippines remains one of the countries in the world with the best debt-to-GDP ratios, or the the ratio of a country’s debt to its gross domestic product (GDP). Typically, governments aim to have debts lower than their GDP. 

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In June 2020, the Philippines’ debt-to-GDP ratio stood at 39 percent of the gross domestic product (GDP). 

This ratio is used to gauge a country’s ability to pay its debts. It also affects the country’s positive credit rating, which in turn, results in lower interest rates when borrowing from international banks. 

According to the World Bank, a 50-percent debt-to-GDP ratio is still considered healthy, but governments should strive to lower the ratio. 

In essence, it is not so bad to incur P9 trillion in national debt, as long as it is below the 50-percent ratio, and as long as the government ensures the money it borrowed is spent well.

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Mario Alvaro Limos
Features Editor, Esquire Philippines
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