Marcos admin drops plan to sell defense bonds

MANILA, Philippines — The government is no longer considering selling “defense bonds” to help fund the ongoing modernization efforts of the military, saying that the upgrades can be financed by tax collections and regular debt offerings.

Finance Secretary Ralph Recto said he supported Defense Secretary Gilberto Teodoro Jr.’s request to increase the budget of the Department of Defense (DND) to bankroll the military’s plan, which includes the acquisition of assets like missile systems, submarines and fighter jets.

“What’s important is the budget cover,” Recto told the Inquirer.

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“There is no need for a defense bond. We can finance it with current tax collection and our regular bond issuances,” he added.

Had the plan pushed through, it would have been the first defense bond sale in the Philippines. Some of the country’s top banks had said the DND could potentially borrow up to P300 billion from the local capital market through the defense bonds.

The banks added that there would be a big demand for such a debt issuance as long as it would be guaranteed by the government. That means the DND’s yearly budget would have to include allocations dedicated for repaying creditors who would participate in the defense bond offering.

AFP modernization

It may be recalled that the Armed Forces of the Philippines received P35 billion this year for its modernization program. This is as the government seeks to bolster the country’s defenses amid the ongoing sea row with China over the resource-rich West Philippine Sea, the part of the South China Sea within the country’s exclusive economic zone that Beijing claims nearly entirely.

READ: Philippines mulls private, foreign funding for military modernization

The approved budget for the revised AFP Modernization Program, however, was P15 billion lower than the P50 billion initially proposed by President Marcos to Congress.

According to Recto, any increases in the budget of the DND would still follow the Marcos administration’s fiscal consolidation efforts to contain its budget deficit, which is projected to reach P1.5 trillion, or 5.3 percent of gross domestic product, this year.

To plug the fiscal hole, the state is targeting to borrow P2.55 trillion from creditors at home in 2025. By sources of financing, the government will borrow P507.41 billion from foreign investors in 2025, while the remaining P2.04 trillion is targeted to be raised domestically.

(2025/05/30-02:30)