Not many people know that the Philippines’ economic managers come up with a yearly document called the Fiscal Risks Statement. It’s the government’s attempt to tell the public of things that could go wrong with the country’s finances.

If you look at the document for 2025, written in 2024, there was no mention at all of corruption. I’m expecting the document for 2026 will at least get to mention that.

But it was already apparent among the economic managers (speaking collectively) that there were red flags that could erode the country’s fiscal space.

The most striking thing is that they already flagged the ballooning of unprogrammed appropriations. They said, “In the years prior to the COVID-19 pandemic, the GAA (General Appropriations Act) levels for UAs (Unprogrammed Appropriations) remained unchanged from their National Expenditure Program (NEP) levels. It was only in 2022 and the years thereafter that GAA levels began to deviate from NEP levels…” 

This is a refreshingly honest take, something you won’t normally hear from the economic managers in press conferences, but totally in line with my own analysis last year.

In particular, the economic managers worried that more and more foreign-assisted projects (FAPs) were being dumped into unprogrammed funds.

They said that if this continues, it “may lead to a slowdown in the implementation of FAPs and result in higher commitment fees and/or charges, as well as necessarily increase the NG’s (national government) deficit by as much as P181.8 billion…” 

Also, we should expect more delays: there’s “greater risk to the timely implementation of FAPs (foreign-assisted projects) considering that these usually cover pre-implementation activities. With this, the agency will be forced to restructure their work plans and targets which will result in a prolonged implementation period.”

A good example of this is the Metro Manila Subway. When I checked the budget documents starting in 2020, the Metro Manila Subway (Phase 1) has been put in unprogrammed funds every year since the 2021. No wonder it’s delayed: from an initial partial opening in 2027, the Subway will be pushed back to 2032.

Another red flag in the Fiscal Risks Statement is the ballooning of pensions for military and uniformed personnel (MUPs). They noted that the government owed in 2023 about P14 trillion in unpaid MUP pensions. That’s nearly thrice the total national budget for that year!

The economic managers said, “It must be reiterated that currently, the pension system is fully dependent on government funding, posing not only a substantial risk to the fiscal position of the NG but also to the pension system itself considering that any fiscal and/or economic shock affecting the NG would directly impact the pensions and retirement benefits doled out to MUPs.” (EXPLAINER: How generous military pension is pushing Philippines to fiscal collapse)

Recall that the Department of Finance, under former secretary Benjamin Diokno, tried to push for MUP pension reforms. Cielo Magno, my colleague at the UP School of Economics, was at the forefront of this reform before she was let go of by the Marcos administration.

But MUP pension reforms stalled when Ralph Recto took over, and God knows whether Frederick Go, the new finance chief, will be bold enough to revisit these much-needed reforms. We can’t just kick the can down the road.

Then there’s the age-old problem of underspending, or the government being unable to fully use up the money it’s allowed to spend. 

The Fiscal Risks Statement explained that the reasons for underspending (or even overspending in some instances) include “the efficiency of agencies in executing their programs and projects, as well as risk events such as weather disturbances, external developments, supply chain disruptions…” The spending ban earlier this year due to the elections was also a factor.

The Department of Health (DOH) divulged earlier this budget season that only 200 of the country’s 600 health centers were operational. The reason is that many local government units failed to hire personnel (like nurses and doctors) for these centers. One lawmaker explained, “These are not ghost projects. They exist, but…they are not functioning.”

Indeed, underspending happens at both the national and local levels. Unless this is addressed, much funding in the government will either be corrupted (there’s no underspending in corrupt public works, as we know now) or simply returned to the treasury.

The Fiscal Risks Statement also highlighted problems with mounting debt. It warned that poorer revenue collections and “weaker-than-expected growth” will put pressure on the government to borrow even more, and this won’t help reduce the debt-to-GDP ratio.

There are many reasons to worry about this. As I wrote on November 14, the 4% growth rate in the third quarter of 2025 turned out to be a shocker. Slow growth means that it will be harder to repay our outstanding debt. I expect economic growth to pick up in the fourth quarter (because of the holiday season) but don’t expect it to rescue the entire year’s growth performance. To reach the government’s lower target of 5.5%, we’ll need 7% growth — a moonshot.

In conclusion, I wonder what the 2026 version of the Fiscal Risks Statement will say. At any rate, President Ferdinand Marcos Jr. could step up reforms to address all these risks to the country’s finances. These days, though, he’s too busy playing politics.

One could even say that the President himself, alongside some members of the economic team, are part of the fiscal risks, too, if we’re going to be honest.

President Marcos, since he’s the one who signed off on the bloated national budgets and turned a blind eye on the budget shenanigans since 2022. Former finance chief Ralph Recto, since he’s the one who took money from PhilHealth and the Philippine Deposit Insurance Corporation to fund items in unprogrammed funds. And former budget chief Amenah Pangandaman, since she’s the one who crafted the proposed budget and allowed massive insertions without batting an eyelash.

In short, the government has been shooting itself in the foot, but just won’t admit it. – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).