PH January debt service up threefold to PHP159B

The National Government’s (NG) debt service bill more than tripled to PHP 158.898 billion in January as both principal and interest payments rose, the Bureau of the Treasury (BTr) reported.

Latest data from the BTr showed that the debt repayments in January surged by 232.2% from the PHP 47.831 billion recorded in the same month a year ago.

The bulk of the debt service bill for the month was composed of amortization payments, which took up more than half or 53.3% of the total.

Principal payments in January surged (9,734%) to PHP 84.677 billion from PHP 861 million in the same month in 2023.

Broken down, this was composed almost entirely of principal payments on external debt at PHP 84.539 billion, which sharply increased (9,753%) from PHP 858 million a year ago.

Amortization on domestic debt jumped (4,500%) to PHP 138 million from PHP 3 million.

Meanwhile, interest payments during the month rose by 58% to PHP 74.221 billion from PHP 46.97 billion in the previous year.

Interest paid on domestic debt climbed by 83.2% to PHP 48.823 billion from PHP 26.647 billion in the same period a year ago.

Interest paid to foreign creditors went up by 25% to PHP 25.398 billion from PHP 20.323 billion.

Higher debt servicing costs were mainly due to a weaker peso exchange rate and elevated interest rates, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The NG front-loaded some borrowings to hedge amid the rising interest rate trend since 2022,” he added in a Viber message.

The Bangko Sentral ng Pilipinas (BSP) has kept its policy rate at a near 17-year high of 6.5% for three straight meetings.

The central bank has been among the most aggressive in the region last year, hiking borrowing costs by 450 basis points from May 2022 to October 2023.

Meanwhile, the peso closed at P56.24 per dollar on March 27, down by 1.55% from its P55.37 finish on Dec. 29, 2023

For the coming months, Mr. Ricafort said that potential rate cuts by the US Federal Reserve and the BSP could help reduce debt servicing costs.

The FOMC (Federal Open Market Committee) stood pat at its meeting in March, keeping its fed funds steady at the 5.25-5.5% range. From March 2022 to July 2023, the Fed raised rates by a total of 525 bps.

BSP Governor Eli M. Remolona, Jr. has said they will likely begin their policy easing cycle in the next few meetings.

Fed officials also affirmed last month that they remain on track to deliver three interest rate cuts this year.

In 2023, the NG’s debt service bill jumped to PHP 1.604 trillion, higher by 24% from PHP 1.293 billion in 2022 and exceeding its program for the year by 3%.

According to data from the latest Budget of Expenditures and Sources of Financing, the NG’s debt service program this year is set at PHP 1.91 billion, composed of PHP 670.5 billion in interest payments and PHP 1.24 trillion in amortization payments. — Luisa Maria Jacinta C. Jocson