NG to spend P624B for debt payments this year

The National Government (NG)has programmed to spend P624.1 billion for debt payments this year, higher than the P612.8 billion that was programmed for last year, latest data from the Department of Finance (DOF) showed.

The programmed debt service for 2008 is equivalent to 8.6 percent of gross domestic product (GDP) compared to the programmed debt service for last year which was 9.3 percent of GDP.

Of the amount, the government is targeting to spend P295.8 billion — 4.8 percent of GDP — for interest payments alone. The amount is P7.5 billion less than the P303.3 billion (4.6 percent of GDP) that was programmed for last year.

Although this year’s programmed debt service payments are higher than what was programmed for last year, the government expects to save on interest payments due to the steady appreciation of the peso against the dollar.

 Estimates by the DOF showed that the Philippines saves as much as P4.2 billion in debt service requirement for every P1 appreciation against the dollar.

The peso is now trading at the 40-to-the-dollar territory.

For principal payments, the government has programmed to spend P328.3 billion for this year or 4.5 percent of GDP. This is P18.8 billion higher than the P309.5 billion (4.7 percent of GDP) that was programmed for principal payments last year.

From January to August last year, the government spent P459.3 billion for debt payments, or 13 percent lower than what was spent in the same period last year as the government benefited from the continued strengthening of the peso against the dollar.

Debt payments recorded in the same period last year amounted to P526.4 billion.

The government has saved close to P25 billion in interest payments during the first eight months of 2007 because of the continued appreciation of the peso against the greenback.

The government has been reducing its debt service payments to have more funds for the more necessary expenditures such as infrastructure and social services.