Debt service bill drops 70% in June

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PHILSTAR FILE PHOTO

The NATIONAL government paid 44.29 billion pesos to service its debt in June, down 70.51% from a year earlier, as higher interest payments were offset by a significant drop in depreciation, according to preliminary data from the Office of the Treasury (BTr) shown.

In June, about 82.99% of debt repayments went to interest, while the rest went to amortization, BTr said.

Overall interest payments rose 22.81 percent to 36.75 billion pesos in June, as interest paid on domestic debt rose 22.94 percent year-on-year to 33.33 billion pesos. These were 9.08 billion pesos for treasury bills, 22.53 billion pesos for retail treasury bills and 942 million pesos for treasury bills.

Interest paid on foreign debt increased by 21.6% to 3.42 billion pesos.

Amortization payments plunged 93.74% to 7.53 billion pesos in June. Major payments to foreign creditors during the month amounted to 7.17 billion pesos, while BTr settled 362 million pesos with domestic lenders.

For the six-month period, the debt service bill fell by 40.76% year-on-year to P458.36 billion, of which about 56.12% is spent on interest payments and the rest on debt. ‘amortization.

Principal payments from January to June amounted to 201.14 billion pesos, down 64.41% from the previous year. These were 153.38 billion pesos of domestic debt and 47.76 billion pesos of foreign bonds.

Interest payments jumped 23.35% to 257.22 billion pesos in the six months to June. These included P205.69 billion in payments to domestic creditors and P51.53 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 2.47 trillion pesos to help finance its budget deficit this year, about 77% of which comes from domestic sources.

In February, Fitch Ratings maintained the country’s investment grade rating of “BBB” but retained the “negative” outlook as it flagged uncertainties surrounding medium-term growth and obstacles to debt reduction. A “negative” outlook means that 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 took out gross borrowing of 1,022 billion pesos in May, down 40.59% year on year, according to BTr data.

The government plans to spend 1.298 billion pesos on debt repayment this year, with 785.21 billion pesos budgeted for principal and the remaining 512.59 billion pesos for interest.

The Philippines recorded a debt-to-gross domestic product (GDP) ratio of 62.1% in the second quarter, still above the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies despite falling 63 .5% at the end of Iffirst trimester. — Diego Gabriel C.Robles

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