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July debt service bill jumps to P156B

BW FILE PHOTO

THE NATIONAL Government saw its debt service bill more than double in July from a year ago, as amortization payments surged.

Preliminary data from the Bureau of the Treasury (BTr) showed the government paid P156.2 billion for debt servicing in July, 158% up from P60.54 billion in the same month a year ago.

Month on month, debt payment tripled from P44.29 billion in June.

In July, around 66.65% of debt repayments went to amortization, while the rest went to interest, the BTr said.   

Overall amortization payments surged by 6,789.94% to P104.11 billion in July from P1.5 billion in the same month last year.

The BTr settled P103.46 billion with domestic lenders, while principal payments to foreign creditors amounted to P647 million. 

Interest payments dropped by 11.75% year on year to P52.09 billion in July, with interest paid on domestic debt 12.09% down year on year to P32.42 billion. This consisted of P27.9 billion for Treasury bonds, P3.58 billion for retail Treasury bonds, and P567 million for Treasury bills.

Interest paid on foreign debt slipped by 11.18% to P19.67 billion in July.

For the seven-month period, the debt service bill dropped by 26.33% year on year to P614.55 billion, with around 50.33% going towards interest payments, and the rest to amortization.

Principal payments from January to July stood at P305.25 billion, down by 46.13% from a year earlier. This consisted of P256.84 billion in domestic debt and P48.41 billion in foreign obligations.

Interest payments jumped by 15.6% to P309.31 billion in the seven months ending in July. These included P238.11 billion worth of payments to domestic creditors and P71.2 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 that would stimulate economic growth.

The government wants to borrow P2.47 trillion to help fund its budget deficit this year, with a goal of sourcing 75% domestically.

The National Government has taken on P1.2 trillion in gross borrowing as of end-July, down by 41.82% year on year, according to the BTr data.

Outstanding debt is expected to rise to P13.43 trillion by the end of 2022 from P12.89 trillion recorded in end-July, with additional borrowing seen at P2.73 trillion and principal repayments at P1.27 trillion this year.

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, above 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.

The government estimates the debt-to-GDP ratio to drop to 61.8% at the end of the year.

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. — Diego Gabriel C. Robles

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