The national government’s outstanding debt climbed to a record high of P17.71 trillion at the end of 2025, according to the Bureau of the Treasury (BTr).

In a Tuesday afternoon report, the BTr said the figure reflects an increase of P1.66 trillion, or 10.32 percent, from the P16.05 trillion recorded at the end of December 2024.

“The increase is due to the government's strategic net issuance of debt instruments to fund development programs, as well as the valuation effects of peso depreciation against the US dollar and third currencies,” the Treasury said.

The new record surpasses the previous month’s level of P17.65 trillion by about P60 million. The BTr noted that the bulk of the debt remains domestically sourced, with 68.4 percent of total borrowings raised locally.

As a result, domestic debt rose to P12.12 trillion at end-December 2025, higher by P1.19 trillion or 10.85 percent year to date. This was driven by the net issuance of government securities through regular auctions and the offering of Retail Treasury Bond Tranche 31.

“By prioritizing peso-denominated financing, which is predominantly held domestically, the government reduces exposure to exchange rate volatility. It also keeps interest payments within the domestic economy and provides Filipinos with a stable and secure investment option,” the BTr said.

The peso has experienced sharp fluctuations over the past two months, closing at record lows against the US dollar on several occasions. Its weakest level was P59.46 on 15 January, largely due to geopolitical instability following the United States’ takeover of Venezuela’s oil assets, as well as ongoing tensions in the Middle East that pushed oil prices higher and strengthened the dollar. Domestically, the ongoing probe into the flood control controversy has also dampened demand for the peso, albeit to a lesser extent than global factors.

RCBC Chief Economist Michael Ricafort said the peso’s recent depreciation has increased the peso value of the government’s external obligations.

“The weaker peso exchange rate vs. the US dollar over the past 3.5 years by at least 15% (at 58–59 levels recently; vs. 51 levels early 2022 or nearly 4 years ago) effectively increased the peso equivalent of the outstanding national government external/foreign debts when converted to pesos,” he said.

“The relatively weaker peso exchange rate vs. the US dollar in recent months … amid the recent political noise… thereby fundamentally increasing the peso equivalent of the national government's foreign/external debts denominated in US dollars and in other foreign currencies,” Ricafort added.

Since President Ferdinand R. Marcos Jr. assumed office in 2022, the national debt has risen by about P4.29 trillion. His administration inherited a debt stock of roughly P13.42 trillion from the Duterte administration, which relied heavily on borrowing during the economic downturn caused by the COVID-19 pandemic.

The peso has also weakened considerably since Marcos Jr. took office, closing Tuesday afternoon at P58.89, compared with P55.57 at the end of 2022.

Ricafort warned that the national debt could climb further in the coming months, partly due to the economic policies of the Trump administration.

“For the coming months, the outstanding national government debt could go to new record highs amid new national government borrowings in recent months and also the need to hedge both local and foreign borrowings of the national government in view of the Trump factor and other geopolitical risk factors,” he said.

The Treasury earlier reported a P1.26-trillion budget deficit for the first 11 months of 2025. Government debt and deficits are closely linked, as fiscal shortfalls require additional borrowing, while rising debt levels increase interest costs and future fiscal pressures if revenues fail to keep pace.

“[The current record high debt level] is also consistent with the continued budget deficit in recent months, thereby fundamentally increasing the need for the national government to borrow more to finance the said budget deficit in recent months/years (which is defined as government expenditure exceeding government revenues),” Ricafort said. 

The economist noted that the probes into the flood control scandal cut spending in the second half of 2025, which “could have been an offsetting positive factor that could have narrowed the budget deficit and, in turn, fundamentally reduce the need for more borrowings.”

Meanwhile, external debt rose to P5.59 trillion, driven by new global bond issuances, net availment of official development assistance from international partners, and the upward revaluation of foreign currency-denominated debt due to unfavorable exchange rate movements.

The BTr recently issued new global bonds to raise funds for government expenditures. The Marcos Jr. administration has vowed to ramp up spending in 2026, with P1.44 trillion in expenditures planned for the first quarter alone to address the infrastructure shortfall that emerged in 2025 amid the flood control scandal.

“Let’s move forward,” the President said during a meeting with the economic team last week.