Debt service bill hits P1.6T in 2023

THE NATIONAL Government’s (NG) debt service bill jumped to P1.604 trillion in 2023, exceeding its program for the year by 3%, the Bureau of the Treasury (BTr) reported.

Data from the BTr showed that the NG’s debt repayments rose by 24% from the P1.293 trillion recorded in 2022.

It also exceeded the P1.552-trillion program for debt payments last year by 3%.

Interest payments increased by 25% year on year to P628.33 billion from P502.86 billion in 2022. Treasury data showed interest payments exceeded the P610.665-billion program for the full year by 2.9%.

Interest paid on domestic debt rose by 13.64% to P435.75 billion last year. This included P263.177 billion in interest payments for fixed-rate Treasury bonds, P149.738 billion for retail Treasury bonds and P17.166 billion for Treasury bills.

Meanwhile, principal payments went up by 23.4% to P975.278 billion in 2023 from P790.323 billion a year earlier. Amortization payments exceeded the P914.353-billion program for 2023 by 6.66%.

Principal payments on foreign debt in 2023 declined by 7.19% year on year to P121.113 billion, while amortization on domestic debt rose by 29.45% to P854.165 billion.

In December alone, the government’s debt repayments rose by 21.51% to P68.866 billion from P56.674 billion in November.

Month on month, interest payments also rose by 24.99% to P60.678 billion from P48.548 billion in November.

Interest paid on domestic debt jumped to P43.552 billion, 23.53% higher than P35.257 billion from the previous month.

Broken down, interest payments on fixed-rate Treasury bonds stood at P14.487 billion, retail Treasury bonds at P25.62 billion, and Treasury bills at P1.891 billion.

For the month of December, amortization payments inched up by 0.76% to P8.188 billion from P8.126 billion in November.

Principal payments on foreign debt in December were flat at P8.062 billion, or 0.4% higher than the previous month’s P8.03 billion. Amortization on domestic debt increased by 31.25% to P126 million compared with P96 million in November.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said higher interest rates globally resulted in an increase in interest expenses and debt service costs.

“Weaker peso exchange rate vs. the US (United States) dollar since 2023 increased the peso equivalent of foreign/external debt, on top of the sharp increase in global and local interest rates since then,” he said in a Facebook Messenger chat.

John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., said the higher debt payments were driven by exchange rate risk.

“The (peso) settled at a depreciated value and is not appreciating significantly to reduce the value of debt. This is a challenge for fiscal consolidation as we are paying more than what we should be,” Mr. Rivera said in a Viber message.

Mr. Ricafort said easing inflation towards the central bank’s target would push the US Federal Reserve to cut rates later this year.

“That could be matched locally and help ease debt servicing costs of the National Government amid relatively stable peso exchange rate,” he added.

The Fed raised its policy rate by 525 bps to 5.25-5.5% from March 2022 to July 2023. The US central bank said they want convincing evidence that inflation would sustain its decline before they consider rate cuts.

Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. last week said it’s too early to declare victory over inflation, which he said is threatened by rice prices and higher-than-expected minimum wages.

Philippine inflation quickened to 3.4% in February, mainly due to rising food prices including rice. — Beatriz Marie D. Cruz