Senator Imee Marcos grills economic officials over falling forex reserves and weaker peso

Senator Imee Marcos pressed the government’s economic managers on Thursday to detail how a weakening peso could inflate national debt servicing and public spending, while demanding answers over a sharp $7.5-billion drop in the country’s foreign exchange reserves.

Speaking at the Development Budget Coordination Committee (DBCC) hearing on the proposed ₱7.2-trillion 2027 National Expenditure Program (NEP), Marcos challenged officials over the government's foreign exchange forecast, which projects the peso at ₱60 to ₱62 against the US dollar in 2027.

Acting Secretary De Leon confirmed that the ₱60–₱62 projection underpins the 2027 budget proposal. Marcos then pressed the panel to quantify the budget impact of currency depreciation, specifically asking how much every ₱1 drop against the dollar adds to government spending.

Finance Assistant Secretary Go reported that out of the country’s total national debt of roughly ₱19 trillion, approximately 33 percent—or ₱6 trillion—is denominated in foreign currencies. Marcos noted that a sliding peso automatically swells the local currency value of these liabilities, increasing taxpayers' burden.

She directed the Department of Budget and Management (DBM) and the Department of Finance (DOF) to submit precise sensitivity calculations and a breakdown of state agencies, programs, and expenditure items most vulnerable to forex shifts. DBM officials agreed to supply data on foreign-assisted projects exposed to exchange rate volatility.

Debt Mix Strategy and Reserve Erosion

When Marcos asked how the government plans to manage currency and credit risks if the peso continues to slide, economic officials revealed that the national government does not hedge its foreign debt. Instead, it relies on shifting its borrowing strategy toward domestic markets.

DBM officials explained that the government has moved away from its historical 60:40 domestic-to-foreign borrowing split. The current target is to source 75 to 80 percent of financing locally, capping foreign borrowing at 20 to 25 percent to insulate the budget from external shocks.

While acknowledging the pivot to domestic debt, Marcos raised red flags over the rapid decline in the Bangko Sentral ng Pilipinas’ (BSP) Gross International Reserves (GIR).

A BSP representative testified that the country’s foreign reserves had dropped to approximately $103 billion, down from $110.8 billion at the end of 2025—a decline of roughly $7.5 billion in just six months.

The central bank official attributed the decline to government dollar withdrawals to settle foreign obligations and valuation adjustments on reserve assets. The official noted, however, that the government sources a portion of its dollar requirements from the open market rather than drawing directly from reserves.

Marcos questioned whether routine payments could account for such a steep drop, emphasizing that scheduled obligations should have already been factored into reserve planning. She formally requested a complete breakdown of all government-to-government transactions and market moves affecting the funds.

Gold Sales and Public Concern

Connecting the drop in reserves to the BSP's recent bullion transactions, Marcos expressed deep concern over the overall trajectory of the nation's financial cushion.

"Na-abala lang tayo dahil hanggang ngayon na-alarma pa rin ang tao doon sa dating balita na nagbenta yung BSP ng katakut-takot na ginto. Eh ngayon naman yung reserves na-erode," Marcos said. "Eh papaano ba 'to? Wala nang matitira."

(“We are deeply concerned because people are still alarmed by earlier news that the BSP sold massive amounts of gold. Now, our reserves are eroding as well. What happens next? Nothing will be left.”)

Marcos concluded by stating that the Senate will hold off on approving the assumptions behind the proposed ₱7.2-trillion 2027 budget until the BSP provides a full, transparent accounting of the reserve losses.

-Paraluman News