Huge spike in principal payments brings down gov’t’s debt amortization

MANILA, Philippines - Government debt servicing fell 28.29 percent in the first nine months of the year due to a sharp decline in principal payments.

Data from the Department of Finance showed that the government spent P337.12 billion to pay its debts from January to September this year.

Total principal payments accounted for P79.73 billion, down 62.4 percent from the P212.05 billion recorded a year ago. The amount included P77.15 billion in foreign obligations and P2.57 billion in domestic debt.

Total interest payments likewise reflected a slight drop to P257.39 billion in the first nine months from P258.08 billion a year ago .  These comprised P172.45 billion in local borrowings and P89.94 billion in foreign loans. 

In September alone, the government shelled out a total of P33.89 billion for debt payments, 91.36 percent lower than the P45.05 billion in the same month last year.

Of the total, P28.8 billion was used to pay interest while P5 billion accounted for principal payments.

The government’s debt servicing requirements are expected to continue their downward trend next year given prudent and efficient public financial management and decreasing principal payments.

Of the proposed 2015 national budget of P2.61 trillion, the government would spend P763.25 billion to pay its debts, P56 billion lower than the P819.19 billion earmarked this year.

Of the P763.25 billion, P390.39 billion has been set aside for principal payments comprising P315.58 billion in domestic debt and P74.8 billion in foreign loans.  The amount allocated for the settlement of principal obligations represents a 16.3 percent drop from this year’s P466.54 billion.

Since President Aquino assumed office in 2010, the proportion of the national budget allotted for interest payments has been on a downward trend.   Last year, the share fell to only 16.6 percent of the budget.

The country’s economic managers intend to further reduce the figure to 12 percent by 2016.

A decline in the amount set aside for interest payments will translate to more funds being channeled to infrastructure, social services and other vital expenditures as the country seeks to sustain economic growth.

Interest payments are part of the government’s national budget while principal obligations are paid using proceeds from fresh loans.

The government’s maturing liabilities have declined due to prepayment of some of its foreign obligations.