Up at P1.95T from yr-earlier P1.53T
Debt servicing by the Philippine government swelled 27.34 percent in the 11 months to end-November 2024 from a year earlier, official figures show, along with higher interest payments and principal amortizations behind the rise.
The Bureau of the Treasury (BTr) said in its latest cash operations report total debt payments for the 11-month period of last year rose to P1.95 trillion from P1.53 trillion in the corresponding period of 2023.
The debt servicing bill also surpassed the full-year 2023 figure of P1.6 trillion.
A private analyst-economist sees a combination of factors behind the surge in the government’s debt servicing bill, mainly pointing to a bigger amount of debt maturities, relatively higher interest rates, as well as a weaker peso, which has increased the peso-equivalent cost of foreign debt repayments.
“This also reflected the wider national government budget deficit for the period that required more national government borrowings/financing, especially some short-term borrowings such as Treasury bills,” RCBC Chief Economist Michael L. Ricafort said.
“National government borrowings/debt have increased sharply since the COVID-19 pandemic, and some of which have already started to mature, thereby leading to higher debt servicing costs,” he added in a note to Malaya Business Insight.
Data showed that as of November 2024, interest payments stood at P705.33 billion, up 24.25 percent from P567.66 billion a year earlier.
Amortization surged 29.15 percent to P1.25 trillion during the period from the year-earlier level of P967.09 billion, the BTr report said.
Borrowing for debt servicing
Looking ahead, Ricafort said the national government’s debt and debt servicing might consequently require more national government borrowings that would add to the outstanding debt stock and the subsequent debt servicing costs, especially as principal payments become due.
On a positive note, the economist said the recent cuts in both US Federal Reserve and BSP policy rates may help reduce the Philippines’ debt servicing costs.
“For as long as the national government’s debt-to-gross domestic product (GDP) ratio (stays) close or is even reduced to below the international threshold of 60 percent of GDP, (from 61.3 percent in the third quarter of 2024), this could help sustain the country’s favorable credit ratings at one to three notches above the minimum investment grade, and fundamentally help sustain the country’s fiscal management and overall debt management over the long term and for the coming generations,” Ricafort said.
Tax warning
He warned, however, tax and fiscal reform measures might still be needed in terms of intensified collections in enforcing tax laws and running after tax cheats, while more disciplined government spending with anti-wastage/anti-leakage/anti -corruption measures would help narrow the budget deficit and slow growth in the national government’s outstanding debt at record highs recently.
The BTr reported earlier that Philippine government debt expanded by P70.7 billion in November to P16.09 trillion, or by 0.4 percent from the prior month, as more local financing was tapped and the peso depreciation against the dollar boosted the value of the country’s overseas debt.
The BTr said in a statement last week that domestic securities accounted for 67.87 percent of the total debt stock, while 32.13 percent represented the country’s overseas obligations.