Debt service bill surges in February

April 30, 2023

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A horse-drawn Kalesa passes through the Ayuntamiento building in Intramuros, Manila, Nov. 6, 2017. The Bureau of the Treasury’s office is located at the Ayuntamiento building. — REUTERS/DONDI TAWATAO

By Luisa Maria Jacinta C. Jocson, Reporter

THE NATIONAL Government’s debt service bill surged to P375.714 billion in February on the back of significantly higher amortization payments, the Bureau of the Treasury (BTr) reported.

Data from the BTr showed the February debt service bill jumped by 1,135% from P30.423 billion in the same month a year ago.

Month on month, debt payments rose by 685.5% from P47.831 billion in January.

Of the total debt service bill in February, the bulk or 90.9% went to amortization. The rest went to interest payments.

Principal payments for February soared to P341.605 billion from just P2.193 billion a year ago and P861 million in January.

Payments for domestic debt skyrocketed by 90,756% to P303.461 billion in February from P334 million a year ago.

Amortization on foreign obligations rose by 1,951% to P38.144 billion in February from P1.859 billion in the previous year.

Meanwhile, interest payments rose by 20.8% to P34.109 billion in February from P28.23 billion a year ago.

Month on month, interest payments fell by 27.4% from P46.97 billion in January.

Broken down, interest on local debt declined by 14% to P21.924 billion from P25.507 billion a year ago.

Domestic interest payments consisted of P12.723 billion in fixed-rate Treasury bonds, P7.458 billion in retail Treasury bonds, and P1.31 billion in Treasury bills.

Interest on foreign debt surged by 370% to P12.815 billion in February from P2.723 billion a year ago.

In the first two months of the year, the debt service bill reached P423.545 billion, 72% higher than P246.261 billion in the same period last year.

Amortization payments during the period more than doubled (124.6%) to P342.466 billion from P152.48 billion.

Meanwhile, total interest payments dropped by 13.5% to P81.079 billion in the two-month period from P93.781 billion a year ago.

HIGHER RATESING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in a Viber message said rising interest rates drove up debt payments, on top of elevated debt levels.

At the end of February, outstanding debt hit a record high of P13.75 trillion.

“Higher debt service data was due to a combination of factors: higher interest payments due to aggressive Federal Reserve rate hikes (and) higher inflation that increased overall government expenditures including interest payments on borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US Federal Reserve has hiked rates by 475 basis points (bps) since March 2022, bringing the Fed funds rate to 4.75-5%.

The Bangko Sentral ng Pilipinas (BSP) has raised rates by 425 bps since May 2022, bringing the key policy rate to a near 16-year high 6.25%.

Inflation slowed to 8.6% in February from a 14-year high 8.7% in January. However, this was still above the central bank’s 2-4% target and 6% full-year forecast.

“Debt servicing could still be higher from March to April, especially in April due to large Treasury bond maturities that are included in the government’s principal payments and still relatively higher interest rates that lead to more expensive borrowing costs,” Mr. Ricafort said.

This year, the government’s debt service program is at P1.6 trillion, 23.3% higher than the P1.298-trillion program in the previous year.

Debt service payments reached P1.293 trillion in 2022, up by 7.4% year on year.