Peso volatility threatens Phl fiscal space – economists

Peso volatility could put additional pressure on the governments fiscal space, potentially increasing the national debt burden and limiting funding for key programs such as education and health care, according to economists.

- By MARCO LUIS BEECH

Despite some fiscal breathing room from stable revenues and a greater reliance on peso-denominated borrowing, Reyes Tacandong & Co. senior adviser Jonathan Ravelas warned that the cushion has limits and could be quickly eroded if peso volatility persists.

“If the peso stays volatile, the P19-trillion debt projection can easily climb by another P150 billion to P250 billion without the government borrowing a single extra peso,” Ravelas said.

On Jan. 8, the Philippine peso fell to a record low of 59.355 per dollar.

Based on the 2026 Budget of Expenditures and Sources of Financing, the national government’s outstanding debt is expected to reach P19.057 trillion by the end of this year.

This figure accounts for almost 70 percent of the total domestic regular account, amounting to P13.281 trillion, while the remaining 30 percent is included as part of the external regular account, valued at P5.775 trillion.

However, the foreign exchange used in the year-end projection is only 57 per greenback.

With the fluctuating peso, Ravelas said that shorter debt maturities and higher investor yield demands are signs that foreign exchange risks are beginning to tighten pressure on the government's finances.