Debt payments surge to PHP908 billion

The National Government’s (NG) debt payments nearly doubled to PHP  907.93 billion during the first half of the year, mainly due to the increase in principal amortization.

Preliminary data from the Bureau of the Treasury (BTr) showed the government’s debt payments surged by 98% in the January-June period from PHP 458.355 billion in the same period last year.

In the first six months, more than two-thirds or 68.89% of the debt service bill went to amortization.

Principal payments as of end-June more than tripled to PHP 625.47 billion from PHP 201.14 billion last year.

Broken down, amortization on domestic debt soared to PHP 561.42 billion as of end-June from PHP 153.38 billion a year ago.

Principal payments on foreign debt jumped by 34.1% to PHP 64.05 billion in the first half from PHP 47.76 billion in the same period a year ago.

Meanwhile, interest payments rose by 9.81% to PHP 282.458 billion in the six-month period from PHP 257.215 billion a year ago.

Interest on local debt slipped by 6.2% to PHP 192.884 billion as of end-June from PHP 205.687 billion last year.

Broken down, interest payments on domestic debt consisted of PHP 108.366 billion for fixed-rate Treasury bonds, PHP 74.731 billion for retail Treasury bonds, and PHP 6.709 billion for Treasury bills.

Meanwhile, interest paid on foreign debt jumped by 73.8% to PHP 89.574 billion in the first semester from PHP 51.528 billion a year ago.

June debt service bill
In June alone, the debt service bill doubled to PHP 88.4 billion from PHP 44.29 billion in the same month in 2022.

Month on month, debt payments surged by 80.2% from P49.05 billion in May.

More than half (59.8%) of the total debt servicing during the month went to interest payments.

Interest payments in June rose by 43.9% to PHP 52.88 billion from PHP 36.75 billion in the same month in 2022.

Interest paid to domestic creditors rose by 20.9% to PHP 40.28 billion. This consisted of PHP 25.62 billion in retail Treasury bonds, PHP 11.412 billion in fixed-rate Treasury bonds, and PHP 1.55 billion in Treasury bills.

Interest paid to external creditors surged by an annual 268.2% to PHP 12.604 billion in June.

Meanwhile, amortization payments skyrocketed (371.4%) to PHP 35.517 billion in June from PHP 7.534 billion in the same month in 2022.

Domestic debt payments ballooned to PHP 27.981 billion in June, while amortization on foreign obligations inched up by 5% to PHP 7.536 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said that the higher debt service bill was partly due to elevated inflation, which drove up government expenditures.

Headline inflation eased to 5.4% in June from 6.1% in May, still well above the central bank’s 2-4% target range.

For the first half, inflation averaged 7.2%.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 5.6% this year.

Mr. Ricafort also noted there was an increase in borrowing costs due to rising interest rates.

The BSP has raised interest rates by 425 basis points (bps) from May 2022 to March 2023, bringing the key rate to 6.25%, a near 16-year high.

“Higher debt servicing is also a function of more maturities of government securities earlier this year,” Mr. Ricafort added.

The government’s debt service program this year is set at PHP 1.552 trillion. This is composed of PHP 914.353 billion in amortization payments and PHP 610.665 billion in interest payments.

Next year, the government set its debt servicing program at PHP 1.91 trillion. Broken down, this consists of PHP 670.471 billion for interest payments and PHP 1.24 trillion for principal amortization. — Luisa Maria Jacinta C. Jocson