Government spends P613.1B to service its debts in 2007

The government spent P613.102 billion to service its debts last year, latest data from the Department of Finance (DOF) showed.

Despite the huge amount, data showed that the latest figure is 28.2 percent lower than the P854.374 billion recorded in 2006.

Of the amount, the government spent P266.833 billion  in interest payments last year, also lower than the P310.108 billion disbursed in 2006 for the same obligations.

For principal payments, the government spent  P346.269 billion last year, also lower than the  P544.266 billion spent in the same period in 2006.

The government has programmed to spend P624.1 billion for debt payments this year, higher than what was recorded last year.

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.

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