Government hikes debt service to P877 billion in 2025 budget

MANILA, Philippines — The government plans to increase the share of debt burden in the proposed record P6.352-trillion budget for next year.

Based on the briefer on the 2025 National Expenditure Program (NEP) obtained by The STAR, 13.8 percent of the budget or equivalent to P876.7 billion will be allocated to pay off debts for 2025.

This is higher than the 12.1 percent share or about P699.2 billion allocation for this year.

Next year’s debt burden amount includes P848 billion for interest payments, 26.5 percent higher than the P670.5 billion under the 2024 General Appropriations Act.

The remaining P28.7 billion is for net lending, flat from last year’s level.

Interest payments go to complying with the country’s interest obligations while net lending, a positive balance, refers to the amount the government has to finance other units or sectors.

These two are the proper measure of the debt burden component of the budget.

The Department of Budget and Management (DBM) has yet to release the complete Budget of Expenditures and Sources of Financing (BESF) for 2025.

The BESF, which will be out today upon submission of the NEP to Congress, contains the detailed expenditure and financing program of the government for next year.

It is in the BESF that the debt service is found, which includes the interest payments and the bigger principal amortization.

However, the economic team has been explaining that the principal amortization of debt is not included as an expense item under any accounting standard, whether in the private or public sector.

This is because the settlement of debt obligations incurred from expenses has already been recorded in the past.

The principal amortization also does not contribute to additional debt because debt obligation is only transferred from an old creditor to a new creditor in the process of refinancing.

Currently, the country’s outstanding debt has been pushed to a record P15.3 trillion as of end-May largely due to the weakening of the peso.

The Bureau of the Treasury earlier said the debt profile remains resilient as most of the debt is issued domestically and in the local currency, thus minimi­zing risks from sharp foreign exchange fluctuations and improving debt servi­cing predictability.

Of the total outstanding debt, 67.3 percent is in peso and only 32.7 percent is in foreign denomination.

“The maturity profile is also consistent with low refinancing risks as the government prioritizes issuing bonds within the belly to the long end of the curve,” the Treasury said.