Debt service bill jumps in May

The National Government’s (NG) debt service bill jumped year on year in May due to a surge in interest payments, the Bureau of the Treasury (BTr) said.

Data from the Treasury bureau showed that debt payments rose by 40.64% to PHP 68.98 billion in May from PHP 49.05 billion in the same month a year ago.

Month on month, debt payments dropped by 57.34% from PHP 161.7 billion in April.

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

The bulk (88.57%) of May’s debt service bill went to interest payments.

Interest payments went up by 47.78% to PHP 61.1 billion in May from PHP 41.34 billion in the same month a year ago.

Interest paid on domestic debt increased by 56% to PHP 46.07 billion from PHP 29.53 billion a year ago.

Meanwhile, interest payments to foreign creditors grew by 27.18% to PHP 15.03 billion in May from PHP 11.82 billion a year ago.

On the other hand, principal payments inched up by 2.34% to PHP 7.88 billion from PHP 7.7 billion last year.

Month on month, amortization plunged by 92% from PHP 94.2 billion in April.

Broken down, amortization on domestic debt in May dropped by 96.8% to PHP 85 million from PHP 2.66 billion a year ago.

Principal payments on external debt increased by 54.51% to PHP 7.8 billion in May from PHP 5.05 billion last year.

FIVE MONTHS
In the first five months of the year, the NG’s debt service bill increased by 48% to PHP 1.22 trillion from P819.53 billion in the year-ago period.

Amortization payments climbed by 51.73% to PHP 895.13 billion in the first five months from PHP 589.95 billion a year ago.

Principal payments on domestic debt reached PHP 754.86 billion, while those on external debt amounted to PHP 140.27 billion.

Meanwhile, interest payments in the January-to-May period jumped by 40.08% to PHP 321.59 billion from PHP 229.57 billion a year prior.

Broken down, interest paid on domestic debt stood at PHP 231.38 billion, while interest payments for external debt reached PHP 90.21 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher debt payments in May could be due to the elevated interest rates and weaker peso.

“The higher debt servicing bill of the NG could be attributed to higher interest rates that increased borrowing costs/financing costs,” he said via Facebook Messenger.

Mr. Ricafort said the weaker peso exchange rate increased the peso equivalent of external debt and debt servicing.

The peso closed at PHP 58.52 against the dollar as of end-May, depreciating by PHP 0.94 from its PHP 57.58 finish as of end-April.

The Bangko Sentral ng Pilipinas has kept the key policy rate at an over 17-year high of 6.5% since October 2023.

The higher debt payments could also reflect the wider budget deficit, Mr. Ricafort said.

The NG’s budget deficit in May widened 43.1% to PHP 174.9 billion amid strong spending over revenues, BTr said. In the first five months of the year, the budget gap ballooned by 24.06% to PHP 404.8 billion from PHP 326.3 billion a year ago.

“There could also be some payment of some multilateral foreign debts, as well as some maturity of some local government securities/debts,” Mr. Ricafort said.

As of end-May, the NG’s debt hit a record high PHP 15.35 trillion, with PHP 10.44 trillion coming from domestic sources and PHP 4.9 trillion from foreign sources. — Beatriz Marie D. Cruz