Debt service bill declines in January

THE NATIONAL GOVERNMENT’S (NG) debt service bill dropped by 78% in January, as interest and amortization payments declined, Bureau of the Treasury (BTr) data showed.

According to the BTr, the government paid PHP 47.831 billion for debt servicing in January, 77.8% lower than the PHP 215.838 billion paid in the same month in 2022.

Month on month, debt service payments declined by 84.2% from PHP 302.125 billion in December.

In January, the bulk or 98.2% of debt servicing went to interest payments.

Interest payments fell by 28% to PHP 46.97 billion during the month, from the PHP 65.551 billion in January 2022.

Broken down, interest paid on domestic debt dropped by 34.7% to PHP 26.647 billion in January, from PHP 40.792 billion a year ago.

Interest on foreign debt likewise decreased by 17.9% to PHP 20.323 billion in January from PHP 24.759 billion a year ago.

Domestic debt consisted of PHP 21.865 billion in fixed-rate Treasury bonds, PHP 3.575 billion in retail Treasury bonds and P757 million in Treasury bills.

Meanwhile, overall amortization payments plunged by 99.4% to PHP 861 million in January from PHP 150.287 billion in the same month a year ago.

The BTr settled PHP 3 million with domestic lenders and PHP 858 million to foreign creditors.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the decline in debt payments was mainly due to the budget surplus recorded in January.

In January, the budget balance swung to a surplus of PHP 45.75 billion. The last time the government recorded a budget surplus was in April 2022, with PHP 4.94 billion.

“Government tax revenue collections improved as the economy reopened towards greater normalcy, while disciplined government spending curtailed government expenditures,” Mr. Ricafort said.

“Maturities of government securities also relatively lower in January, thereby fundamentally leading to lower government debt servicing,” he added.

Debt servicing could also rise in the next few months.

“For the coming months, government debt servicing could increase in view of larger maturities of government securities up to April,” Mr. Ricafort said.

Finance Secretary Benjamin E. Diokno earlier said the government plans to launch a retail dollar bond offering this month.

For 2023, the government programmed debt payments to reach PHP 1.6 trillion, 23.3% higher than last year’s PHP 1.298-trillion program.

In 2022, actual debt service payments reached P1.293 trillion, up 7.4% year on year.

The government borrows from external and local sources to fund a budget deficit capped at 6.1% of gross domestic product (GDP)this year.

For 2023, the government plans to borrow PHP 2.207 trillion. Of the total, PHP 1.654 trillion will be sourced domestically and the remaining PHP 553.5 billion will be borrowed from external sources.

At the end of February, outstanding debt hit a record high of PHP 13.75 trillion.

The country’s debt-to-GDP ratio stood at 60.9% as of end-December, still above the 60% threshold considered manageable by multilateral lenders for developing economies.

The government aims to trim the debt-to-GDP ratio to less than 60% by 2025, and to 51.5% by 2028. — By Luisa Maria Jacinta C. Jocson