May debt service bill rises nearly 52%

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THE National Government paid P57.44 billion to service its debt in May, up 51.96% from a year earlier, with both interest and amortization components rising, the Bureau of the Treasury (BTr) said, citing preliminary data.

In May, around 58.9% of debt repayments serviced interest, while the rest went to amortization, it said.

Overall interest payments rose 16.93% to P33.83 billion in May, with interest paid on domestic debt up 19.74% year on year at P28.87 billion. This consisted of P19.41 billion for Treasury bonds, P7.94 billion for retail Treasury bonds, and P1.53 billion for Treasury bills.

Interest paid on foreign debt rose 2.86% to P4.96 billion.

Amortization payments rose 166.3% to P23.61 billion in May. All payments of principal during the month went to foreign creditors. The BTr settled no outstanding principal with domestic lenders.

The five-month debt service bill dropped 33.6% year on year to P414.07 billion, with around 53.24% going towards interest payments, and the rest to amortization.

Principal payments from January to May stood at P193.61 billion, down 56.49% from a year earlier. This consisted of P153.02 billion in domestic debt and P40.59 billion in foreign obligations.

Interest payments rose 23.43% to P220.46 billion in the five months. These included P172.36 billion worth of payments to domestic creditors and P48.11 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 P883.11 billion in gross borrowing as of May, down 43.38% 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 63.5% as of the first quarter, higher than the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies. — Diego Gabriel C. Robles