NG debt service bill drops by 25% in June

The National Government’s (NG) debt service bill fell by 25.25% in June as amortization payments declined, the Bureau of the Treasury (BTr) said.

Data from the BTr showed that the NG’s debt repayments dropped to PHP 66.08 billion in June from PHP 88.4 billion in the same month a year ago.

Month on month, the debt service bill also dipped by 4.21% from PHP 68.98 billion in May.

The debt service refers to payments made by the National Government on its domestic and foreign debt.

The bulk or 84.21% of the total debt service bill in June went to interest payments.

BTr data showed that interest payments for the month climbed by 5.22% to PHP 55.64 billion in June from PHP 52.88 billion a year ago.

Broken down, interest paid on local debt slid by 8.98% year on year to PHP 36.66 billion.

Domestic interest payments consisted of PHP 13.84 billion in fixed-rate Treasury bonds, PHP 19.18 billion in retail Treasury bonds (T-bonds), PHP 2.3 billion in Treasury bills (T-bills), and others (PHP 1.34 billion).

Interest paid on foreign obligations surged by 50.58% to PHP 18.98 billion in June from PHP 12.6 billion in the same month a year ago.

On the other hand, amortization during the month dropped by 70.63% to PHP 10.43 billion from PHP 35.52 billion a year earlier.

Domestic principal payments fell by 90.79% to PHP 2.58 billion in June from PHP 27.98 billion in the same month in 2023.

Amortization on foreign debt rose by 4.23% to PHP 7.86 billion in June from PHP 7.54 billion a year ago.

The lower year-on-year debt repayments may be linked to the peso depreciation and higher funding needs amid a “persistent” budget deficit, Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

“It can also be due to reallocation of funds to finance areas requiring attention such as recovery from the dry spell and other calamities that hit in June,” he added.

The NG’s budget deficit narrowed by 7.24% to PHP 209.1 billion in June from PHP 225.4 billion a year ago, the BTr said.

FIRST-HALF BILL

Meanwhile, the debt service bill in the first half of the year rose by 41.29% to PHP 1.28 trillion from PHP 907.93 billion in the same period a year ago.

Principal payments accounted for more than 70.59% of the total in the first half.

In the January-to-June period, amortization payments rose by 44.78% to PHP 905.56 billion from PHP 625.47 billion in 2023.

Principal payments made on domestic debt reached PHP 757.43 billion, while payments for foreign obligations reached PHP 148.13 billion during the period.

Meanwhile, total interest payments during the first six months increased by 33.55% to PHP 377.23 billion from PHP 282.46 billion last year.

Foreign interest payments in the first six months amounted to PHP 109.19 billion, while domestic interest payments stood at PHP 268.04 billion.

In the first half, interest payments made to the domestic market include PHP 170.5 billion in fixed-rate Treasury bonds, PHP 74.66 billion in retail Treasury bonds, PHP 15.78 billion in T-bills, and others at PHP 8 billion.

In a Viber chat, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the debt service bill could decline in the coming months amid lower maturities of government securities for the remainder of the year.

The NG plans to borrow PHP 630 billion from the domestic market in the third quarter.

Broken down, the BTr is looking to raise P260 billion from T-bills and PHP 370 billion via T-bonds in the period.

The NG’s debt stock rose to a fresh high PHP 15.48 trillion as of end-June from PHP 15.35 trillion as of end-May.

Under the latest Budget of Expenditures and Sources of Financing, this year’s debt service program is set at PHP 2.03 trillion. – Beatriz Marie D. Cruz, Reporter