Government slightly cuts debt payment in August

MANILA, Philippines — The government slightly reduced its debt service to P186 billion in August, with the bulk going to amortization to domestic lenders.

Data from the Bureau of the Treasury showed the administration trimmed its debt payments in August, settling some P186.22 billion, down 1.5 percent from P189.03 billion in the same period last year.

About 72 percent of the debt service was for amortization or the settlement of the principal amount at P133.44 billion.

This is an almost 10 percent decline from the P146.36 billion paid in the comparative period in 2023.

On the other hand, interest payments went up by 24 percent to P52.78 billion from P42.67 billion in August 2023.

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

For amortization, the bulk at 91 percent amounting to P122.03 billion was remitted to domestic creditors.

The remaining P11.4 billion in principal payments were made to foreign sources.

Close to 75 percent of the interest payments at P39.36 billion were issued to domestic creditors.

Broken down, the government paid the interest for P18.7 billion in fixed-rate Treasury bonds, P16.87 billion in retail T-bonds and P3.74 billion in Treasury bills.

The Treasury sells government securities every week to generate funding for public programs and projects. Short-dated T-bills have tenors of 91, 182 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 P13.42 billion in interest owed to foreign financiers in August.

For the eight-month period, debt payment picked up by 11 percent to P1.55 trillion from P1.4 trillion in January to August 2023.

The eight-month amortization payment at P1.04 trillion is also 11 percent higher than the P940.19 billion in the comparative period.

For January to August, interest payments likewise increased by 11 percent to P509.44 billion.

As of end-August, the government had settled 76 percent of its total debt service for 2024, which is at a record P2.03 trillion.

This is divided into a 77:23 mix in favor of domestic creditors.

The government intends to spend P763.44 billion for interest payments and return P1.26 trillion worth of principal to comply with the amortization of debts mostly to local lenders as well.

The country’s outstanding debt has eased to P15.55 trillion as of end-August.

For next year, the government targets to settle a record P2.05 trillion in debts, divided into P848.03 billion for interest payments and P1.2 trillion for principal amortization.

This will be just a percentage higher from the target P2.03 trillion debt service for 2024.