The national government’s total debt service payments rose 26 percent last year in the aftermath of loans it obtained in 2020 to fund the pandemic recovery efforts.
The Bureau of the Treasury (BTr) said the combined interest payments and amortization amounted to P2.021 trillion in 2024, compared with the previous year’s P1.604 trillion.
The total debt payments last year, however, was within the government’s programmed amount of P2.027 trillion, as shown by data available on the BTr website yesterday.
Interest payments in 2024 grew 21.48 percent to P763.313 billion from P628.333 billion in 2023, but came in slightly below the programmed P763.437 billion.
Meanwhile, principal payments increased by 28.9 percent to P1.257 trillion in 2024 from P975.278 billion in 2023 but remained marginally below the programmed amount of P1.263 trillion.
The government’s total debt stock reached P16.05trillion in 2024, an increase of 9.8 percent from P14.65 trillion in 2023.
John Paolo Rivera, Philippine Institute for Development Studies senior research fellow, told Malaya Business Insight that the higher total debt payments in 2024 were driven by the increase in interest payments and amortization as it reflected the government’s aggressive borrowing in 2020 to 2023 to fund pandemic recovery and infrastructure projects.
“While global interest rates have stabilized, debt issued at higher rates in previous years is now coming due, leading to higher interest payments. The PHP’s (peso’s) movement also played a role, as debt servicing costs are sensitive to forex fluctuations. The government may have opted to pay off larger portions of its obligations early, taking advantage of periods of favorable liquidity conditions,” Rivera said.
Rivera said debt servicing remains manageable, but the increasing share of revenues allocated to interest and amortization reduces fiscal space for social programs and infrastructure.
“Higher debt payments could limit new spending initiatives unless revenue collection improves significantly. If economic growth
slows or revenues underperform, the government may need to adjust its borrowing mix to avoid excessive reliance on new debt,” Rivera said.
Meanwhile, Ateneo de Manila University economist Leonardo Lanzona also told Malaya Business Insight that it is likely that pandemic-related loans were paid off through new and higher interest-bearing loans, as tax revenues are just enough to pay for its expenditures.
“If this is the case, more costly debt may continue to pile up resulting in fiscal risks and more unappropriated programs in the future,” Lanzona said.
For his part, Michael Ricafort, Rizal Commercial Banking Corp. chief economist, also said that the higher debt servicing is primarily due to the larger amount of borrowings since the COVID-19 pandemic, as seen also in many countries around the world, thereby increasing principal payments as they fall due a few years after, so interest payments correspondingly increased as well.
“Still, the relatively higher interest rates and weaker peso exchange rate since the Russia-Ukraine war started in February 2022 also increased debt servicing, particularly interest payments and also higher peso equivalent for foreign/external debts amid weaker peso since then,” Ricafort told Malaya Business Insight.
“There may be a need for more fiscal reform measures to reduce government expenses and tax reform measures to further increase structural tax revenue collections to narrow the budget deficit and curb the additional need for borrowings,” he added.
According to the Budget of Expenditures and Sources of Financing for fiscal year 2025, the national government’s debt service is expected to reach P2.051 trillion this year.
Of that amount, P1.203 trillion will be for principal amortization obligations, while P848.031 billion will cover interest payments due this year.
