The International Monetary Fund (IMF) and the Department of Finance (DoF) have agreed to a dedicated team that should produce better economic forecasting for the Philippines as a way to manage national debt which has reached P16.3 trillion as of January this year.

An IMF report released this week said the team must implement tasks and monitor progress in the finance officials’ use of the Comprehensive Adaptive Expectations Model (CAEM), a simplified version of the IMF’s Globally Integrated Monetary and Fiscal (GIMF).

“Despite having the GIMF model, the DoF staff lacks the training to recalibrate or modify it. CAEM will better support the DoF in conducting policy analysis, improving fiscal planning, and ensuring sustainable capacity development,” IMF said.

The IMF report released this week came after the Bureau of Internal Revenue said the January debt rose by nearly 2 percent compared to the level in December 2024.

Meanwhile, the government’s budget surplus declined by 22 percent as expenditures grew by 19.5 percent post-pandemic.

Last year, the country’s gross domestic product as a measure of economic growth also fell short of the Development Budget Coordination Committee’s minimum target of 6 percent.

The IMF said its Institute for Capacity Development will help the DoF officials modify the CAEM framework to suit the Philippine context and create timelines for practicing the use of the framework and strategies to mitigate fiscal risks.

“Their collaborative efforts will include self-paced training between missions to enhance their capabilities further and ensure adherence to the project’s objectives,” IMF said.

Hybrid approach

“The implementation of the project will adopt a hybrid approach, with most missions to be conducted in-person, supplemented with in-between mission virtual engagements,” the global financial institution added.

Bank of the Philippine Islands chief economist Jun Neri said US President Donald Trump’s trade, fiscal, and foreign relations policies could push up interest rates in the global debt markets, making government borrowings costlier.

Following Trump’s order on limiting US-backed weapons for Europe, Neri said German bond rates increased to 3 percent this month from 2 percent last year.

The economist added that US and UK bonds hovered nearly 5 percent from 4.4 percent.

“The ripple effect has been quite substantial. If something like that can happen on a global scale, it’s not a favorable thing for us,” Neri said.

He said the peso might also weaken against the US dollar if Trump pursues protectionist policies.

“The US dollar is weakening against the Euro by a meaningful amount. This triggered weakness in other currencies,” Neri said.

Peso depreciation

The Bangko Sentral ng Pilipinas reported the country’s foreign debt rose by 9.8 percent to $137.62 billion last year partly due to peso depreciation.

In November last year, the peso slid to P59 per $1 before hovering over 57 levels this month, according to the Bankers Association of the Philippines.

Last Friday, the peso slightly weakened to P57.381/$1 from P57.37/$1 on Thursday amid investors’ worries about Trump’s implementation of over 10 percent tariffs on Chinese, Canadian, and Mexican goods on 2 April.

DoF Secretary Ralph Recto said the government will be limiting external borrowings this year to a “very minimal” level ranging from $250 to $500 million.

“I think we’ve got it covered already for the year,” he said.

In a meeting of the Philippine economic team last December, Recto said the government aims to reduce the country’s fiscal deficit to 3.7 percent of GDP by 2028 from 5.7 percent last year.