The Marcos Jr. administration is seeking to implement the largest national budget in Philippine history – a proposed P6.793 trillion for 2026 – despite a tight fiscal space, growing deficit, and ballooning debt, raising questions on how the government plans to balance ambition with sustainability.

Approved by the Development Budget Coordination Committee (DBCC) in its 191st meeting on 27 June, the proposed 2026 National Expenditure Program (NEP) is 7.4 percent higher than this year’s P6.326-trillion budget and represents 22 percent of the country’s projected GDP.

Budget Secretary Amenah Pangandaman, who chairs the DBCC, said the new proposal “reflects the government’s commitment to fostering inclusive economic growth while maintaining fiscal discipline.”

The NEP is scheduled to be submitted to Congress in August. But even before deliberations begin, the numbers show the balancing act facing the administration.

The Department of Budget and Management (DBM) received budget proposals amounting to P10.1 trillion from national agencies, but only P6.793 trillion was cleared for 2026 funding. According to Pangandaman, this prioritization took into account program readiness and absorptive capacity, as well as ongoing efforts to reduce the budget deficit.

“We focused on prioritizing programs and projects that deliver measurable impact… aligned with our national goals,” she said.

The proposed budget places emphasis on education, health, upskilling, digitalization, and climate resilience, and maintains support for infrastructure under the Build Better More program. It also channels funding into devolved local services, a strategy intended to strengthen governance at the grassroots.

Despite these ambitions, the budget push comes as the government faces increasing pressure to contain its widening fiscal gap.

Rising debt, rising spending

As of end-April 2025, the national government’s outstanding debt hit P16.75 trillion, according to the Bureau of the Treasury (BTr) on 3 June. While the month-on-month rise was limited to 0.41 percent – thanks to a stronger peso – domestic debt still climbed to P11.59 trillion, and external obligations stood at P5.16 trillion.

The debt load is expected to remain manageable, with 91.7 percent of obligations on fixed interest rates and 82 percent long-term. The administration also maintains that it is on track to bring the debt-to-GDP ratio below 60 percent by the end of President Marcos’ term.

Yet with interest payments and financing needs projected to grow alongside spending plans, some may find it increasingly difficult to reconcile the size of the proposed budget with the country’s fiscal consolidation goals.

The government is aiming to cut the deficit-to-GDP ratio to 3.8 percent by 2028 – a target set under the Medium-Term Fiscal Framework. But the latest fiscal numbers suggest a steeper road ahead.

Deficit swells past P400 billion in first four months

The BTr earlier reported a budget deficit of P411.5 billion from January to April 2025, driven by a 13.57 percent increase in expenditures year-on-year. This came despite a modest 3.35 percent growth in total revenue collections over the same period, which reached P1.5 trillion.

In April alone, the government recorded a budget surplus of P67.3 billion – an improvement attributed to higher tax collections. The Bureau of Internal Revenue led the way with P420.5 billion, boosted by income and value-added tax receipts.

However, the overall April revenue haul of P522.1 billion was still 2.82 percent lower than a year ago, as non-tax revenues fell sharply by 68.08 percent to P24.1 billion. The Treasury attributed this drop to delayed remittances from government-owned and controlled corporations (GOCCs).

On the expenditure side, the government spent P454.8 billion in April, a decrease from the previous year, largely due to a 31.2 percent reduction in interest payments. But with major infrastructure projects ramping up, and new budget allocations already approved by the DBCC, spending is expected to accelerate in the months ahead.

Promise vs. pressure

The administration is presenting the 2026 budget as a vehicle for “Nurturing Future-Ready Generations,” emphasizing programs aimed at poverty reduction, job creation, and long-term economic resilience.

“By nurturing future-ready generations through coordinated policy implementation and strategic investments, the government is committed to reducing poverty to single-digit levels, creating quality jobs, safeguarding macroeconomic stability, and ultimately achieving our Agenda for Prosperity in the Bagong Pilipinas – even amidst global uncertainties,” Pangandaman said.

Yet the challenge lies in meeting these promises while managing a fiscal landscape marked by rising debt, slowing non-tax revenues, and growing obligations. As Congress prepares to deliberate on the NEP in August, much will depend on how the proposed figures translate into real-world delivery – and how the administration navigates between development goals and fiscal restraint.