Debt service bill falls 70% in June

THE NATIONAL Government paid P44.29 billion to service its debt in June, down by 70.51% from a year earlier, as a rise in interest payments was offset by the significant decline in amortization, preliminary data from the Bureau of the Treasury (BTr) showed.

In June, around 82.99% of debt repayments went to interest, while the rest went to amortization, the BTr said.

Overall interest payments rose by 22.81% to P36.75 billion in June, with interest paid on domestic debt up by 22.94% year on year to P33.33 billion. This consisted of P9.08 billion for Treasury bonds, P22.53 billion for retail Treasury bonds, and P942 million for Treasury bills.

Interest paid on foreign debt rose by 21.6% to P3.42 billion.

Amortization payments plunged by 93.74% to P7.53 billion in June. Principal payments that went to foreign creditors during the month amounted to P7.17 billion, while the BTr settled P362 million with domestic lenders.

For the six-month period, the debt service bill dropped by 40.76% year on year to P458.36 billion, with around 56.12% going towards interest payments, and the rest to amortization.

Principal payments from January to June stood at P201.14 billion, down by 64.41% from a year earlier. This consisted of P153.38 billion in domestic debt and P47.76 billion in foreign obligations.

Interest payments jumped by 23.35% to P257.22 billion in the six months ending in June. These included P205.69 billion worth of payments to domestic creditors and P51.53 billion to external creditors.

The government borrows from foreign and local sources to fund its budget deficit as it spends more than the revenue it generates to support programs to stimulate economic growth.

The government wants to raise P2.47 trillion to help fund its budget deficit this year, with about 77% coming from domestic sources.

Fitch Ratings in February maintained the country’s investment grade “BBB” rating, but kept the “negative” outlook as it flagged uncertainties surrounding medium-term growth and hurdles to bringing down debt. A “negative” outlook means a downgrade is possible within the next 12 to 18 months.

S&P Global Ratings last affirmed the Philippines’ “BBB+” rating with a “stable” outlook in May 2021. Meanwhile, Moody’s affirmed its “Baa2” credit rating with a “stable” outlook for the Philippines in July 2020.

The National Government has taken on P1.022 trillion in gross borrowing as of May, down by 40.59% year on year, according to the BTr data.

The government plans to spend P1.298 trillion on debt payments this year, with P785.21 billion budgeted for principal and the remaining P512.59 billion for interest.

The Philippines registered a debt-to-gross domestic product (GDP) ratio of 62.1% as of the second quarter, still higher than the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies despite easing from 63.5% at the end of the first quarter. — Diego Gabriel C. Robles