PHL crisis response must stay targeted amid thin fiscal buffers, says IMF

By Katherine K. Chan, Reporter

WASHINGTON, D.C. — The Philippines’ response to the Middle East war-driven energy crisis should remain time-bound and targeted to help preserve its limited fiscal buffers as price shocks may persist, the International Monetary Fund (IMF) said.

Krishna Srinivasan, director for the Asia and Pacific Department at the IMF, said it is important for cash-strapped economies in the region to only implement focused support to avoid further straining their fiscal positions.

“Why do we say that? Because buffers have come down, and we don’t know how long this shock will last,” Mr. Srinivasan told a press briefing here on Thursday.

“So, providing targeted support is very important, and that applies in the case of (the) Philippines. Debt levels aren’t very low; it’s still at about 60%. So, there’s not much by way of fiscal buffers.”

Since the war in the Middle East erupted in late February, the government has implemented several support measures mainly to ease the financial burden for the public transport sector and consumers.

These include cash aid and a P10-per-liter fuel subsidy for public transport drivers, a 20% fare discount for commuters, as well as the suspension of the excise tax on kerosene and liquefied petroleum gas.

The Department of Finance said the excise tax halt could lead to revenue losses of around P4.1 billion over the next three months.

The crisis poses a fresh challenge to the National Government’s (NG) medium-term fiscal consolidation program, under which it wants to gradually reduce its budget deficit and bring down its outstanding debt, which ballooned during the coronavirus pandemic.

Outstanding NG debt amounted to P17.71 trillion at end-2025, bringing its share in the gross domestic product (GDP) to 63.2%, the highest since the 65.7% posted in 2005. This is above the 60% debt-to-GDP threshold considered by multilateral lenders to be manageable for developing economies.

Keeping support focused on the most vulnerable would prevent the Philippines from further narrowing its fiscal space, which was also affected by a graft scandal related to flood control and infrastructure projects that came to light last year, Mr. Srinivasan said.

“The momentum coming into 2026 was weaker. And this reflects the fact that… sentiment is still weak given the governance issues with these flood control projects, the public flood control projects. So, that was already weighing on sentiment across investors,” he said. “And then comes the shock.”

The IMF now sees Philippine GDP expanding by 4.1% this year, much slower than the 5.6% it earlier projected and the post-pandemic low growth of 4.4% in 2025.

“(The) Philippines is a very energy-intensive economy,” Mr. Srinivasan said. “It relies a lot on imports. So, the shock has a significant bearing on prospects in (the) Philippines.”

Over 90% of the Philippines’ oil supply is sourced from the Middle East, making it vulnerable to shocks emerging from trade disruptions and attacks on energy infrastructure in the region.

The global energy price shock caused double-digit increases in local pump prices in the weeks following the start of the war. As a result, Philippine headline inflation already breached the central bank’s 2%-4% annual goal in March, coming in at 4.1%, which was the fastest pace in nearly two years.

After declaring a year-long energy emergency amid fears of a supply shortage, the government has moved to secure fuel from Japan, Malaysia, India and Oman, among others.

As of April 10, the country’s average fuel stock is estimated to sustain demand for about 50.31 days or 75.55 million liters of consumption.

“So, use your buffers in a very efficient way. And that’s what is important for the Philippines and for other countries in the region, especially those which rely a lot on imports [and] don’t have much by way of physical buffers of oil and gas,” Mr. Srinivasan said.