President Ferdinand Marcos Jr.’s State of the Nation Address on July 27 will be delivered against the backdrop of a decade marked by corruption, fiscal mismanagement and widening inequality.
Estimates suggest that P8.8 trillion was lost to corruption between 2016 and 2025. Beyond the financial leakage, the figure represents the opportunity cost of classrooms left unbuilt, hospitals underfunded and farmers exposed to traders and import shocks.
The central issue for the Sona is whether the administration will move beyond short-term relief and confront the structural links among corruption, rising debt, peso weakness, import dependence and deteriorating public services.
How debt dependence took hold
When Marcos assumed office in mid-2022, the national debt stood at P12.79 trillion. By the end of May 2026, it had climbed to P18.55 trillion, an increase of nearly P6 trillion during his presidency.
The rapid buildup reflects the government’s continued reliance on borrowing to cover fiscal gaps. This approach is reinforced by Presidential Decree No. 1177, which provides for the automatic appropriation of debt-service payments.
Although the framework reassures creditors, it effectively locks the Philippines into a debt-first fiscal regime in which repayment obligations compete with education, health, agriculture and other essential services for government resources.
The surge in debt has also coincided with peso depreciation, driven in part by the demand for dollars to pay external obligations and imports. Although the peso briefly appreciated in May 2026, its longer-term weakness has raised the cost of servicing foreign debt and reduced household purchasing power.
Workers have said that a P85 wage increase cannot offset higher food prices and expenses such as electricity and water bills.
At an exchange rate of P63 to $1, a barrel of oil priced at $100 would cost P6,300. The same barrel would cost P4,200 at an exchange rate of P42 to $1 during the Aquino administration.
This erosion of purchasing power affects poor and middle-income households most because they spend a larger share of their income on essential goods and services.
The administration’s borrowing strategy – with domestic obligations accounting for 67.4 percent of total debt and much of the debt carrying fixed interest rates – has reduced some foreign exchange and interest-rate risks.
But the scale of the debt buildup has increased fiscal obligations at a time when households are already contending with higher food prices and weaker real incomes.
Households with assets and access to credit are better positioned to absorb these shocks, while low- and middle-income families face greater financial pressure.
Debt incurred during the Marcos administration has expanded the government’s fiscal obligations while coinciding with peso weakness, reduced purchasing power and food inflation.
This cycle illustrates how debt dependence under PD 1177 can deepen inequality and weaken socioeconomic resilience.
Why food prices remain vulnerable
Food inflation is among the most visible consequences of the country’s economic vulnerabilities.
The Philippines imports about 31 percent of its food supply, creating demand for dollars and exposing domestic prices to exchange-rate movements. Peso depreciation raises the cost of imported rice, meat, sugar, fruits and vegetables.
Oil shocks add to these pressures. Higher crude prices raise the cost of fertilizer, trucking and irrigation, which producers and distributors may pass on to consumers.
Even the threat of disruption in the Strait of Hormuz can raise insurance and freight costs, contributing to higher food prices.
Poor households, which generally have limited savings and few ways to protect themselves from price shocks, bear much of the burden.
Middle-income households also lose purchasing power and face a greater risk of falling into poverty.
Sugar farmers under pressure
One issue that should be addressed in the Sona is the excessive importation of refined sugar and the increasing use of alternative sweeteners.
When converted into cane sugar equivalent, alternative sweeteners are estimated to account for as much as half of sugar consumption. This reduces demand for locally produced sugar and puts downward pressure on domestic prices.
The imbalance causes losses for farmers and gives traders greater influence over the market.
A balanced approach is needed. The government should support domestic production through cooperatives while regulating imports to protect farmers from unfair pricing.
Without such measures, the sugar industry – already weakened by pests and international competition – faces further decline.
Reforms left undone
The Marcos administration has yet to deliver the structural reforms needed to address these problems.
Smuggling cases and alleged ghost projects in the Department of Public Works and Highways have not resulted in sufficient prosecutions.
The transfer of P60 billion in PhilHealth funds also has not been reversed despite a Supreme Court ruling ordering the funds’ return.
These failures undermine public confidence and allow fiscal leakages to continue.
The National Food Authority’s minimum support price of P21 per kilogram of palay is ineffective unless the agency can purchase a significant share of farmers’ harvests.
With its limited budget, the NFA cannot buy the proposed minimum of 25 percent. Farmers are therefore often forced to sell to traders at prices below their production costs, perpetuating rural poverty.
These governance failures have also contributed to declining public confidence in the administration.
The staggering cost of corruption
The estimated P8.8 trillion lost to corruption between 2016 and 2025 represents more than financial leakage. It reflects development opportunities that the country was unable to pursue.
The losses can be measured in classrooms that were not built, hospitals that remained understaffed, farmers who received inadequate support and communities that were denied essential infrastructure and services.
In education, those resources could have financed tens of thousands of classrooms, eased overcrowding and reduced reliance on double-shift schedules that compromise learning.
The government could also have hired more teachers, improved teacher-student ratios and invested in science laboratories, libraries and digital infrastructure.
Instead, the education sector continues to contend with shortages, outdated facilities and underpaid personnel.
In health care, the lost resources could have helped expand universal health coverage, improve provincial hospitals and ensure access to essential medicines.
The transfer of P60 billion from PhilHealth, which the Supreme Court ordered returned, illustrates the consequences of poor fiscal decisions.
Rural health units could have been modernized, helping reduce the gap in health care access between urban and rural communities. Instead, millions of Filipinos remain vulnerable to medical costs that can push households deeper into debt.
Corruption has also weakened food security and farmer welfare.
The NFA’s minimum support price of P21 per kilogram of palay will have limited effect unless the agency can buy a substantial share of farmers’ harvests.
Greater procurement capacity, stronger cooperatives and additional postharvest facilities could help stabilize farm incomes and reduce dependence on imports.
Such support could also give farmers greater protection from price manipulation.
Instead, excessive imports of refined sugar and the growing use of alternative sweeteners have depressed local prices, causing an estimated P7.28 billion in losses to the domestic sugar industry.
Infrastructure has also been affected.
Alleged ghost projects in the Department of Public Works and Highways divert resources from roads, bridges and flood-control systems that could improve connectivity and strengthen communities against disasters.
Railway reconstruction and improvement have also yet to receive sufficient priority.
The consequences are evident in communities isolated by poor transport links, farmers unable to bring their produce efficiently to markets and cities that remain vulnerable to flooding.
Corruption also contributes to debt dependence. When public resources are lost or misused, the government must borrow more to finance its operations and programs.
National debt reached P18.55 trillion by the end of May 2026. Under PD 1177, debt service is automatically appropriated, allowing repayment obligations to take priority over some social programs.
The broader consequence is widening inequality.
Households with substantial assets are better protected from inflation, while poor families remain exposed to food-price shocks and inadequate public services. Middle-income households are also squeezed by declining purchasing power.
This widening gap weakens social cohesion and erodes trust in government.
The P8.8 trillion estimate is therefore not merely a fiscal statistic. It represents overcrowded classrooms, understaffed hospitals, impoverished farmers and unfinished infrastructure.
A government free from corruption could redirect these resources toward investments that reduce import dependence, strengthen public services and build a more resilient and inclusive economy.
Instead, corruption has reinforced debt dependence, perpetuated inequality and prevented the country from reaching its full economic potential.
An economy sustained by OFWs
Another issue that should be acknowledged in the Sona is the role of overseas Filipino workers, or OFWs, in sustaining the Philippine economy.
The administration has highlighted the country’s achievement of upper-middle-income country status. However, this classification is supported in part by the billions of dollars in remittances sent home by OFWs.
Without those remittances, the country’s income position would be weaker, exposing the fragility of its domestic economy.
The continued departure of Filipinos for overseas work should not be treated solely as an indicator of progress.
It also reflects the lack of well-paying jobs, weak industrial growth and persistent rural poverty that drive workers to seek opportunities abroad.
Migration can contribute to a brain drain and the loss of skilled labor and human capital.
Nurses, engineers, teachers, agriculturists and other skilled workers leave for better opportunities overseas, depriving the country of talent that could strengthen its institutions and industries.
Although remittances provide essential support to families and the economy, dependence on them can mask structural weaknesses, including inadequate job creation, weak agricultural support and an underdeveloped industrial policy.
Instead of reforming domestic systems to create sustainable livelihoods, the state continues to depend heavily on the sacrifices of migrant workers.
The social costs are also substantial. Families are separated, children grow up without one or both parents at home, and communities lose working-age residents.
OFWs are frequently praised for their economic contributions, but their migration is also a symptom of weaknesses in the domestic economy.
The country’s upper-middle-income classification does not, by itself, establish broad-based prosperity.
A more durable path to development would create opportunities at home, reduce the economic pressure to migrate and allow the Philippines to use its human capital for national development.
Until then, dependence on OFW remittances will continue to mask economic weaknesses rather than substitute for structural reform.
Governance remains the missing reform
Marcos’ Sona deserves scrutiny not because programs such as Benteng Bigas Meron Na cannot provide short-term relief, but because structural reforms have not received sufficient attention.
Without prosecutions in smuggling and corruption cases, stronger fiscal discipline and accountable governance, subsidies remain temporary measures.
The debt-corruption trap ensures that poor households bear the greatest burden while middle-income families lose economic ground.
A corruption-free government could redirect trillions of pesos toward classrooms, hospitals and agricultural support.
It could help stabilize the peso by reducing import dependence and strengthening domestic production.
It could enforce fiscal discipline by reversing improper fund transfers and prosecuting those responsible for economic crimes.
It could regulate sugar imports and alternative sweeteners to protect farmers from market manipulation.
It could also acknowledge the role of OFWs and address the brain drain by creating better opportunities at home.
The administration’s narrative of achievement must be measured against the reality of widening inequality, rising debt obligations and persistent governance failures.
Structural reform must therefore be at the center of the Sona. Without it, short-term programs will not be enough to transform the Philippines from a debt-dependent and unequal state into a resilient and inclusive economy.