Gov’t allocates P791.5 B for 2014 debt servicing

MANILA, Philippines - The government is allocating P791.5 billion for public debt servicing next year or 34 percent of the proposed 2014 national budget of P2.268 trillion, according to a report from the Department of Finance (DOF).         

The government is planning to pay P352.7 billion in interest – P248.4 for domestic debt and P104.3 billion for foreign borrowings.  Total interest payment for next year is 5.6 percent higher than the P333.9 billion programmed for this year.        

For principal payments, the government will spend about P438.8 billion. This includes P350.9 billion for domestic debt servicing.

The amount allocated for principal payments on foreign debt, on the other hand, ranges from P85.8 billion to P89.9 billion, depending on the foreign exchange rate which for 2014 budgeting purposes was pegged at P41-43 per $1.

Money used to pay for interest on loans comes from the government’s budget, which is supported by tax and non-tax revenues it collects and earns.

In the first six months of the year, the government settled P316.38 billion in loan obligations, 12.79 percent lower than the P362.79 billion paid in the same period in 2012.         

The government’s total outstanding debt stood at P5.36 trillion as of May.  Of this amount, P3.46 trillion came from domestic sources while P1.9 trillion was owed to external editors (GDP).        

The figure is expected to increase to P5.78 trillion this year, equivalent to 48 percent of the country’s gross domestic product.        

The Aquino Administration has been relying on domestic borrowings rather than from the international market owing to the enormous liquidity in the country’s financial system.  This is in line with the government’s strategy to pare down foreign currency debt, lengthen maturities and trim borrowing costs.

Budget Secretary Florencio B. Abad said the government remains committed to its fiscal consolidation strategy which should help reduce the country’s debt stock and create more fiscal space for programs and projects that support inclusive economic growth.