OUTSTANDING debt held by the national government climbed to a fresh record high of P18.546 trillion as of end-May, as it continued raising funds to support its budget needs amid the Middle East crisis.

The debt stock grew by 9.62 percent from P16.918 trillion in the same period a year ago, according to data released by the Bureau of the Treasury on Thursday.

Compared with the previous month’s level, outstanding debt was up by 0.41 percent from P18.470 trillion as of end-April.

Despite the ongoing Middle East crisis, the government proceeded with its domestic borrowings and issued securities to finance its growing budget needs, the Treasury said.

“[The] budget deficit has become chronic,” former Socioeconomic Planning Secretary Dante B. Canlas told BusinessMirror.

As the government keeps on borrowing to finance its fiscal hole, public debt grows and so does debt servicing, thereby crowding out the government’s spending on public goods and services, Canlas said.

“The Iran war has slowed down the [government’s] GDP growth,” Canlas said. “Slow growth, with reduced government revenues, weakens further the fiscal position of the government.”

Heightened global uncertainty could also push up borrowing costs in the near term as investors demand greater compensation for risk, said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines.

“Rising interest costs remain a key risk, as they may limit the government’s fiscal flexibility over the medium term,” Asuncion told the BusinessMirror. “The key challenge will be managing financing costs while sustaining fiscal consolidation efforts.”

The deficit is projected to widen to P1.658 trillion this year and will further stretch through the end of the Marcos Jr. administration in 2028 (See: https://businessmirror.com.ph/2026/06/29/budget-deficit-seen-to-widen-through-mid-2028/).

Strong peso tempered increase

Despite the increase in outstanding debt, the appreciation of the peso against the US dollar and other foreign currencies moderated the growth by reducing the peso value of external obligations.

Broken down, domestic borrowings accounted for 67.37 percent of the total outstanding debt, while external obligations made up the remaining 32.63 percent.

This borrowing strategy prioritizes domestic financing to support local capital markets and reduce exposure to foreign exchange risks, the Treasury said.

However, foreign debt jumped by 17.77 percent to P6.051 trillion as of end-May from P5.138 trillion a year earlier, on the back of a stronger peso.

Month-on-month, external debt inched down by 0.07 percent from P6.055 trillion.

The downward valuation effect of P18.91 billion outweighed the P14.90 billion in net external debt availment, the Treasury said.

Meanwhile, debt owed to local lenders rose by 6.07 percent to P12.495 trillion as of end-May from P11.780 trillion in the same period last year.

This was also higher by 0.65 percent month-on-month from P12.415 trillion, as the government’s net issuance of government securities amounted to P80.23 billion in May.