Gov’t debt service bill surges in 2024

The national government’s (NG) debt service payments surged to PHP 2.02 trillion in 2024 as both interest and amortization payments increased, the Bureau of the Treasury (BTr) said.

Data from the Treasury showed that the NG’s debt repayments rose by 26% to PHP 2.02 trillion last year from the PHP 1.604 trillion recorded in 2023.

However, it fell short of the PHP 2.027-trillion program for debt payments by 0.3% last year.

Debt service refers to payments made by the NG on its domestic and foreign debt.

The bulk or 62.22% of total debt payments came from amortization payments.

Principal payments jumped by 28.92% to PHP 1.26 trillion in 2024 from PHP 975.28 billion in the previous year. This was 0.47% lower than the BTr’s PHP 1.263-trillion program for the year.

Amortization on domestic debt went up by 19.18% annually to PHP 1.018 trillion, while principal payments on foreign debt surged by 97.58% to PHP 239.293 billion last year.

On the other hand, interest payments went up by 21.48% to PHP 763.31 billion in 2024 from PHP 628.33 billion in 2023. It was 0.02% below the PHP 763.437-billion program for the full year.

Interest paid on domestic debt went up by 23.89% to PHP 539.83 billion in 2024 from PHP 435.74 billion in 2023.

Broken down, PHP 340.5 billion was for interest payments for fixed-rate Treasury bonds, PHP 153.92 billion for retail Treasury bonds, and PHP 32.69 billion for Treasury bills.

For external debt, interest payments went up by 16.04% to PHP 223.48 billion from PHP 192.59 billion in the previous year.

December debt service

In December alone, debt repayments slipped by 3.73% to PHP 66.3 billion from PHP 68.87 billion in the same month in 2023.

Month on month, interest payments fell by 29.25% from PHP 93.7 billion in November.

Amortization payments rose by 1.61% to PHP 8.32 billion in December last year from PHP 8.19 billion in December 2023.  It was entirely composed of principal payments on external debt, since there were no payments made on domestic debt in December.

Meanwhile, interest paid on domestic debt fell by 4.45% to PHP 57.98 billion in December from PHP 60.68 billion in the same month in 2023.

Broken down, interest payments on retail Treasury bonds at PHP 19.18 billion, fixed-rate Treasury bonds stood at PHP 14.51 billion, and Treasury bills at PHP 2.27 billion.

Interest payments on external debt jumped by 19.93% year on year to PHP 20.54 billion in December from PHP 17.13 billion in 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher debt servicing reflects the rising repayments on the significant amount of debt incurred by the government during the coronavirus disease 2019 (COVID-19) pandemic.

As of end-2024, NG’s total outstanding debt reached PHP 16.05 trillion, 9.8% higher than the end-2023 level.

“(The) still relatively higher interest rates and weaker peso exchange rate since the Russia-Ukraine war started in February 2022 also increased debt servicing, particularly interest payments. Also (the) higher peso equivalent for foreign/external debts amid weaker peso since then (from PHP 51 levels in early 2022, or at least 12% weaker since then),” he said.

Mr. Ricafort said the expected rate cuts by the US Federal Reserve would “somewhat help reduce external debt servicing costs, going forward.”

“But would be offset by [Donald] Trump’s higher US import tariffs and other protectionist policies that could reduce Fed rate cuts,” Mr. Ricafort said.

Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said he expects higher debt service bill this year mainly due to external debt repayments.

“However, in 2025, I expect foreign loan repayments to be the major driver rather than domestic borrowing repayments as the Philippine peso is expected to depreciate relative to the dollar, causing higher repayments needed to meet the country’s obligations,” he said. — A.R.A. Inosante