Government to Borrow P2.7 Trillion for 2026 Budget
MANILA — The government is set to borrow about P2.7 trillion to cover an anticipated fiscal deficit of P1.6 trillion in the 2026 national budget, sources said. This borrowing plan is outlined in analyses of the 2026 National Expenditure Program (NEP), which reveal a significant reliance on both domestic and foreign loans.
According to budget analysts, the government will raise P2.1 trillion from domestic lenders and P627.1 billion from foreign creditors. This breakdown means approximately 77 percent of the borrowing will come from within the country, while 23 percent will be sourced externally.
Borrowing Strategy and Historical Context
Officials reported that to finance the fiscal gap, the government typically uses a combination of borrowing, expanding the money supply, increasing taxes, or cutting expenditures. In recent years, domestic borrowing has consistently accounted for about 75 percent of total government loans.
The 2026 borrowing plan marks the largest loan volume to date under President Ferdinand Marcos Jr.’s administration. Historical data shows gross borrowings at P2.1 trillion in 2023, increasing to P2.5 trillion in 2024, and P2.6 trillion in 2025, highlighting a steady upward trend.
Shift in Borrowing Mix and Debt Service Impact
Community members noted a slight shift in the borrowing mix for 2026 compared to 2025, with domestic borrowing projected at 77 percent, down from 81 percent, and foreign borrowing rising to 23 percent from 19 percent. This adjustment reflects a return to borrowing patterns seen between 2020 and 2024, when external loans ranged between 22 and 27 percent.
Despite increased borrowing, debt servicing costs for 2026 are expected to decrease slightly to P2 trillion, or 30.3 percent of the proposed budget. This includes P950 billion for interest payments and P1.1 trillion for principal amortization. Although this is an improvement from the 33.8 percent debt service ratio in 2025, it remains substantially higher than the pre-pandemic level of 19.7 percent in 2019.
Debt-to-GDP Ratio Projections and Fiscal Challenges
Local leaders noted that the debt-to-GDP ratio is forecasted to remain around 60 percent in 2026, specifically between 60.6 and 60.9 percent. The ratio is expected to dip below the 60 percent threshold only by 2027, hovering just under at 59.6 to 59.9 percent.
The Congressional Policy and Budget Research Department (CPBRD) warned that these projections depend heavily on favorable conditions such as strong economic growth, steady revenue increases, stable macroeconomic factors, and controlled deficit spending. They emphasized the importance of keeping the primary deficit within approximately -2.0 percent of GDP to avoid worsening debt ratios.
President Marcos Addresses Debt Concerns
President Ferdinand Marcos Jr. acknowledged the country’s substantial debt, now at P17 trillion, including obligations accumulated during the COVID-19 pandemic. However, he assured the public that his administration is committed to reducing the debt to manageable levels.
“We will have enough budget to fund these projects. So long as the country’s money is being used properly,” Marcos said. He stressed the importance of accountability, citing the example of classroom construction funds: “If the budget law said two classrooms will be built, then there should be two—not just one. Because that means, someone pocketed funds.”
Budget Utilization and Agency Performance
The CPBRD released detailed reports on the 2026 NEP, highlighting that while some agencies like the Department of Education have high budget utilization rates, others show low obligation and disbursement rates. Obligation rates refer to funds already allocated to agencies, while disbursement rates indicate actual payments made to contractors.
For instance, the Department of Education’s textbook delivery program recorded disbursement rates of only 11 percent in 2023 and 17 percent in 2024. Analysts urged Congress to address these mismatches between financial commitments and physical outputs, noting that some departments continue to meet performance targets despite underutilizing their budgets.
2026 Budget Deliberations Begin
House officials have started scrutinizing the proposed P6.7 trillion budget for 2026, with the committee on appropriations reviewing the Development Budget Coordination Committee’s (DBCC) report. The DBCC is being questioned on how it formulated the National Expenditures Program and the state of government finances, including funding sources.
The Department of Budget and Management officially submitted the 2026 NEP to the House on August 13. The largest portion of the proposed budget is earmarked for education at P928.5 billion, followed by public works at P881.3 billion and health at P320.5 billion.
Other Major Department Allocations
- Defense: P299.3 billion
- Interior and Local Government: P287.5 billion
- Agriculture: P239.2 billion
- Social Welfare: P277.0 billion
- Transportation: P198.6 billion
- Judiciary: P67.9 billion
- Labor and Employment: P55.2 billion
For more news and updates on government borrowing for 2026 budget, visit Filipinokami.com.
