July debt service bill jumps by 26%

By Beatriz Marie D. Cruz, Reporter

THE NATIONAL GOVERNMENT’S (NG) debt payments jumped in July as interest payments on local borrowings increased, the Bureau of the Treasury (BTr) said.

The latest BTr data showed that the debt service bill went up 26.13% to P81.17 billion in July from P64.36 billion in the same month a year ago.

Month on month, debt payments also rose by 22.85% from P66.08 billion in June.

The debt service bill refers to payments made by the government on its domestic and foreign borrowings.

Interest payments comprised 97.85% of the debt service bill for the month.

In July, interest payments increased by 24.99% to P79.43 billion from P63.55 billion in the same month in 2023.

Broken down, interest paid on domestic obligations soared by 41.84% to P55.32 billion in July from P39 billion last year.

This consisted of P47.03 billion for fixed-rate Treasury bonds, P3.58 billion for retail Treasury bonds, P2.9 billion for Treasury bills (T-bills), and others (P1.81 billion).

Interest payments made on external debt dipped by 1.78% to P24.11 billion in July from P24.55 billion last year.

On the other hand, principal payments more than doubled to P1.74 billion in July from P808 million a year earlier.

Principal payments on external debt surged by 113.58% to P1.56 billion in July from P729 million in the same month last year.

Amortization on domestic debt soared by 134.18% to P185 million in July from P79 million a year prior.

In the first seven months of the year, NG debt payments jumped 40.28% to P1.36 trillion from P972.29 billion a year ago.

Principal payments accounted for 66.52% of debt servicing as of end-July.

Amortization payments jumped by 44.87% to P907.3 billion during the January-to-July period from P626.28 billion a year ago. Principal payments on domestic debt stood at P757.62 billion, while amortization payments on external debt amounted to P149.68 billion.

In the January-July period, interest payments rose by 31.98% to P456.66 billion from P346 billion last year.

Domestic interest payments as of end-July amounted to P323.36 billion, while external interest payments stood at P133.3 billion.

During the period, interest payments on local borrowings comprised P217.53 billion for fixed-rate Treasury bonds, P78.24 billion for retail Treasury bonds, P18.68 billion for T-bills, and others (P8.91 billion).

“Rising interest rates and maturing obligations are driving up the government’s debt service bill. However, strong revenue collection and external financing are helping to manage the burden,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Elevated interest rates here and abroad continued to drive up interest payments on debt, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The stronger peso exchange rate recently could reduce the peso equivalent of foreign debt principal and interest payments,” Mr. Ricafort said in a Viber message.

The local unit closed at P55.995 on Friday, 20.5 centavos stronger than its P56.2 finish on Thursday.

A potential rate cut by the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve could help reduce the NG’s interest payments, Mr. Ricafort added.

At its Aug. 15 meeting, the Monetary Board cut the policy rate by 25 basis points (bps) to 6.25% from the over 17-year high of 6.5% previously.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board may cut interest rates by another 25 bps in the fourth quarter. Only two meetings are left this year — Oct. 17 and Dec. 19.

For its part, the Fed is widely expected to begin its easing cycle this week.

The National Government (NG) plans to borrow P630 billion from the domestic market in the third quarter. Broken down, it is looking to raise P260 billion from T-bills and P370 billion via T-bonds in the period.

The NG’s debt stock climbed to a record-high P15.69 trillion as of end-July from P15.48 trillion as of end-June.

This year’s debt service program is set at P2.03 trillion, according to the latest Budget of Expenditures and Sources of Financing.