Moody’s: PH faces debt challenges

Debt-watcher Moody’s Ratings projects that the Philippine debt burden will remain above pre-pandemic levels, as weakening debt affordability and elevated funding costs weigh on government finances, despite recent easing by the Bangko Sentral ng Pilipinas (BSP).

- DERCO ROSAL

This also comes despite Moody’s affirmation that the government’s fiscal consolidation efforts are on track to meet the revised Medium-Term Fiscal Framework (MMTF), which aims to reduce the deficit to 4.3 percent of the country’s output by the end of the Marcos administration.

“Meeting the goal will be supported by reform measures at enhancing revenue collection and spending efficiency. This will drive a moderation in the government's debt burden, although it will remain above pre-pandemic levels,” Moody’s noted.

“Debt affordability, measured by the ratio of interest payments to revenue, is expected to weaken over the next two years, before gradually normalizing as global refinancing rates decline and economic growth returns to its long-term trend,” Moody’s said.

Moody’s further said that despite recent rate cuts, elevated government funding costs and a lag in monetary policy transmission will keep the interest burden higher in the near term.