Debt service bill surges to P207B in September

THE NATIONAL GOVERNMENT’S debt service bill surged to P207 billion in September due to higher amortization payments, according to the Bureau of the Treasury (BTr).

Preliminary data from the BTr showed the government made P206.996 billion in debt service payments in September, 280.16% up from the P54.45 billion seen in the same month a year ago.

Month on month, debt service payments jumped by 203.08% from P68.3 billion in August.

Of the total, 71.06% of debt repayments during the month went to amortization, while the rest went to interest.

In September, amortization payments hit P147.1 billion, significantly higher than the P6.59 billion in the same month last year.

The BTr paid P128.33 billion in principal payments to domestic lenders, while payments to foreign creditors amounted to P18.77 billion.

On the other hand, interest payments rose by 25.16% year on year to P59.9 billion from P47.86 billion in the same month a year ago.

Interest paid on domestic debt jumped by 19% year on year to P47.72 billion in September. This consisted of P24.03 billion in interest for Treasury bonds, P22.53 billion for retail Treasury bonds, and P744 million for Treasury bills.

Interest paid on foreign debt in September climbed by 57.16% to P12.18 billion from P7.75 billion in the same month a year ago.

Despite the rise in September, the nine-month debt service bill slipped by 7.68% year on year to P889.85 billion. More than half (55.05%) went to interest payments, and the rest to amortization.

In the January to September period, principal payments dropped by 21.56% year on year to P489.87 billion. This consisted of P407.94 billion in domestic debt and P81.93 billion in foreign obligations.

Interest payments declined by 17.87% to P399.98 billion in the nine months ending in September. These included P306.21 billion worth of payments to domestic creditors and P93.77 billion to external creditors.

The government plans to borrow P2.47 trillion from local and external sources to help plug a budget deficit capped at 7.6% of gross domestic product (GDP) this year, with a goal of sourcing 75% of this domestically.

As of end-September, the National Government’s outstanding debt grew 3.8% to a record P13.52 trillion, driven by peso depreciation and higher domestic borrowings.

The government allocated P1.298 trillion on debt payments this year, with P785.21 billion for principal and P512.59 billion for interest.

DEBT-TO-GDPMeanwhile, the National Government’s outstanding debt as a share of GDP rose to 63.7% at the end of September, its highest rate in 17 years or since the 65.7% logged in 2005.

Data from the BTr showed the latest quarterly debt-to-GDP ratio was higher than the 62.1% as of end-June.

At 63.7%, the debt-to-GDP ratio was much higher than 60.4% at the end of 2021, and 39.6% at the end of 2019.

It remains above the 60% threshold considered manageable by multilateral lenders for developing economies.

The government is aiming to bring down the debt-to-GDP ratio to 61.8% by yearend and all the way to 52.5% by 2028.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that inflationary pressures would likely keep the debt-to-GDP ratio at 63-64% for the rest of the year.

“This would require greater intervention, in the quest to bring down the debt-to-GDP ratio to below the 60% international threshold through more fiscal reform measures such as intensified tax collections, higher tax rates, and even possible new taxes,” Mr. Ricafort said in a text message.

Mr. Ricafort noted new tax measures at this time may “not be that good” since these could add to inflationary pressures.

“But once inflation stabilizes, there is a need to push for more tax reform measures, at the very least intensified tax collections. Faster economic growth amid further reopening would be the biggest catalyst to help reduce the debt-to-GDP ratio,” he added.

October inflation accelerated to 7.7%, its fastest pace in almost 14 years, mainly driven by rising food prices.

In the first nine months, GDP growth averaged 7.7%, putting the economy on track to meet the 6.5-7.5% full-year target. — Luisa Maria Jacinta C. Jocson