February 9, 2023

Filipino Guardian

Sentinels of Filipino Free Press

Debt service bill rises to P207B in September


According to the Bureau of the Treasury (BTr), the NATIONAL GOVERNMENT’s debt service bill rose to P207 billion in September due to higher principal payments.

Preliminary data from BTr showed that the government made debt service payments of P206.996 billion in September, up 280.16% from P54.45 billion in the same month a year ago.

Month-on-month, debt service payments increased 203.08% from P68.3 billion in August.

Of the total, 71.06% of debt repayments during the month went toward principal while the remainder went toward interest.

In September, principal payments totaled P147.1 billion, significantly higher than the P6.59 billion in the same month last year.

BTr made capital payments of P128.33 billion to domestic lenders, while payments to foreign creditors totaled P18.77 billion.

On the other hand, interest payments increased 25.16% year-on-year to P59.9 billion from P47.86 billion in the same month last year.

Interest paid on domestic debt rose 19% year-on-year to P47.72 billion in September. These consisted of P24.03 billion in interest on government bonds, P22.53 billion on private bonds and P744 million on Treasury bills.

Interest payments on foreign debt rose 57.16% to P12.18 billion in September from P7.75 billion in the same month last year.

Despite the September surge, the nine-month debt service bill slipped 7.68% year-on-year to 889.85 billion pesos. More than half (55.05%) went into interest payments, the rest into amortization.

In the January-September period, principal payments declined 21.56% year-on-year to P489.87 billion. This consisted of P407.94 billion in domestic debt and P81.93 billion in foreign debt.

Interest payments declined 17.87% to P399.98 billion in the nine months to September. This included payments worth P306.21 billion to domestic creditors and P93.77 billion to external creditors.

The government plans to borrow 2.47 trillion pesos from local and external sources this year to plug a budget deficit capped at 7.6% of gross domestic product (GDP), with a goal of sourcing 75% of that domestically.

At the end of September, the national government’s outstanding debt grew 3.8% to a record 13.52 trillion pesos, fueled by peso depreciation and higher domestic borrowing.

The government provided 1.298 trillion pesos for debt payments this year, including 785.21 billion pesos for principal and 512.59 billion pesos for interest.

Meanwhile, the national government’s outstanding debt as a percentage of GDP rose to 63.7% at the end of September, the highest in 17 years or since 65.7% in 2005.

Data from BTr showed that the latest quarterly debt-to-GDP ratio was higher than the 62.1% seen at the end of June.

At 63.7%, the debt ratio was well above 60.4% at the end of 2021 and 39.6% at the end of 2019.

It remains above the 60% threshold considered manageable by multilateral lenders to developing countries.

The government aims to bring the debt ratio down to 61.8% by the end of the year and to 52.5% by 2028.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said inflationary pressures are likely to keep the debt-to-GDP ratio at 63-64% for the rest of the year.

“This would require stronger intervention to bring the debt-to-GDP ratio below the international 60% threshold through more tax reform measures such as more intensive tax collections, higher tax rates and even possible new taxes,” Mr Ricafort said in a text message.

Mr Ricafort pointed out that new tax measures might not be “so good” at this point as they could add to inflationary pressures.

“But once inflation stabilizes, more tax reform measures need to be pushed, at least increased tax collections. Faster economic growth assuming further reopening would be the biggest catalyst to bring the debt-to-GDP ratio down,” he added.

October inflation accelerated to 7.7%, the fastest pace in almost 14 years, mainly driven by rising food prices.

In the first nine months, GDP growth averaged 7.7%, putting the economy on track to reach the full-year target of 6.5-7.5%. — Luisa Maria Jacinta C. Jocson