Philippines: Debt servicing tripled to P81 billion in November

MANILA, Philippines — The government tripled its debt service to more than P81 billion in November last year, keeping up with efforts to cut the country’s outstanding obligations to within manageable levels.

Based on records from the Bureau of the Treasury, the November debt payment grew three-fold to P81.24 billion from P26.79 billion a year ago, on a triple-digit jump in amortization.

Interest payment rose by 56 percent to P31.22 billion as amortization expanded seven-fold to P50.02 billion, the agency said.

According to the Treasury, the bulk of the interest payment at over 88 percent or P27.55 billion went to domestic creditors, mostly for investors in fixed rate Treasury bonds and retail T-bonds. The remaining 12 percent or P3.68 billion was settled with foreign lenders.

For amortization or the return of principal, the lion’s share of more than 86 percent or P43.07 billion was paid to local sources for the redemption of bond sinking funds. The other 14 percent at P6.95 billion was turned over by the government to external financiers.

With a month left in the year, the government had increased its debt service by nearly 28 percent to a record P1.13 trillion as of November 2021 from P888.69 billion a year earlier.

Likewise, interest payment went up by over 13 percent to P402.11 billion, while amortization ballooned by 37 percent to P732.06 billion.

For 2021, the government had set a program of P1.29 trillion for debt payment to settle some of the borrowings it amassed to bankroll its pandemic response.

Debt service will then grow to P1.3 trillion by the time President Duterte ends his term this year. Interest payment should amount to P512.59 billion, while amortization should hit P785.21 billion, based on the expenditure plan.

The government has embarked on a policy of slowing the growth of the national debt after it reached a 16-year high in the third quarter last year. When measured against gross domestic product, the debt pile has spiraled to 63.1 percent, the highest since 71.6 percent in 2005.

At this rate, for every P100 worth of products and services the Philippines produces, it owes P63.1 to lenders here and abroad.

Further, exceeding the international debt threshold of 60 percent, as observed by credit monitors and multilateral institutions, may alarm creditors about the country’s capacity to pay off its debts.