Philippines: Government hikes debt payments in May

MANILA, Philippines — The government raised its debt payments for the first time in six months in May to P57 billion, as it pushes on with its move to slash its obligations in line with fiscal consolidation.

According to the Bureau of the Treasury, debt servicing increased by more than half to P57.44 billion in May from P37.8 billion a year ago on a triple-digit jump in amortization.

Broken down, interest payments rose by 17 percent to P33.83 billion from P28.93 billion while amortization or the settlement of principal nearly tripled to P23.61 billion from P8.87 billion.

The bulk of the interest payments at P28.87 billion was issued to domestic creditors.

Based on data, the government paid the interest for P19.41 billion in fixed-rate Treasury bonds, P7.94 billion in retail T-bonds and P1.53 billion in Treasury bills.

The Treasury sells securities every week to generate funding for public programs and projects.

T-bills with tenors of 91 days, 182 days and 364 days are offered every Monday while T-bonds with maturities of up to 20 years are auctioned every Tuesday.

Aside from the settlement to local lenders, the government cleared P4.96 billion in interest owed to foreign financiers in May.

On the other hand, all of the P23.61 billion in amortization was remitted to external creditors, as no principal payment was made to domestic sources during the month.

The debt payments in May marked the first time since November last year that the government increased its settlements on a year-on-year basis.

However, on an annual level, the debt service went down by 34 percent to P414.07 billion in the five months to May from P623.6 billion during the same period in 2021.

While interest payments grew by 23 percent to P220.46 billion, amortization declined by 56 percent to P193.61 billion.

The government has to remit a total of P882.93 billion in the remaining seven months of the year to fulfill its obligations.

For 2022, the government plans to settle a record P1.3 billion in debts, divided into P512.59 billion for interest payments and P785.81 billion for amortization.

Debt payments swelled by 25 percent to P1.2 trillion last year from P962.47 billion in 2020 as the government started paying off some of the loans it acquired for pandemic response.

The government intends to improve its revenue administration and eliminate wasteful spending to consolidate its fiscal position and, in the process, bring down the debt pile.