Government debt payments slashed by half in October

MANILA, Philippines — The government brought down its debt payments in October amid a decline in principal amortization, with still about 30 percent of the debt service needed to be paid for the rest of the year.

Data from the Bureau of the Treasury showed the government slashed its payments in October by 55 percent to P39.82 billion from P89.07 billion in the same period last year.

This effectively reduced the 10-month debt payments by 11.7 percent to P929.66 billion from P1.05 trillion in January to October 2021.

This also means the end-October debt payments now stands at 71.51 percent of the P1.3-trillion debt service expenditure for 2022.

The government still has two months to pay off the remaining portion of the debt at P370.34 billion.

Further, data from the Treasury showed amortization, or the settlement of principal, plummeted by 88 percent to just P6.63 billion from P57.53 billion in 2021.

The 10-month amortization payment at P496.5 billion is still 27 percent lower than the P681.96 billion in the comparative period.

On the other hand, interest payments inched up by 5.2 percent to P33.19 billion in October from P31.54 billion. The bulk of the interest payments at P22.41 billion were issued to domestic creditors.

For January to October, interest payments increased by 17 percent to P433.16 billion from P370.88 billion.

Spending on amortization goes to returning the loan principal, while interest payments go to complying with interest obligations.

Broken down for the month of October, the government paid the interest for P17.64 billion in fixed-rate Treasury bonds (T-bonds), P3.58 billion in retail T-bonds and P706 million in Treasury bills (T-bills).

The Treasury sells government securities every week to generate funding for public programs and projects. Short-dated T-bills have tenors of 91 days, 182 days and 364 days while long-term T-bonds have maturities of up to over 20 years.

Aside from payment to local lenders, the government settled P12.78 billion in interest owed to foreign financiers during the month.

Meanwhile, 87 percent of the amortization at P5.74 billion was remitted to external sources with the remaining P894 million in principal payments made to domestic creditors during the month.

For this year, the government plans to settle a record P1.3 trillion in debts, divided into P512.59 billion for interest payments and P785.81 billion for amortization.

Debt payments swelled by 25 percent to P1.2 trillion last year, from P962.47 billion in 2020, as the government started paying off some of the loans it acquired for pandemic response.

The government intends to improve its revenue administration and eliminate wasteful spending to consolidate its fiscal position and, in the process, bring down the debt pile.