Gov’t debt payments ballooned in Q3, says BTr

The Marcos administration dealt with a bigger debt servicing bill in the third quarter, with the majority of repayments going to local borrowings that had reached their due date while borrowing costs have risen.

Data from the Bureau of the Treasury (BTr) showed the government settled obligations worth P492.38 billion in the third quarter, up 14.11 percent year-on-year. Compared to the preceding quarter, the debt servicing bill bloated by 43.89 percent.

Since the beginning of the year, debt payments have reached P1.4 trillion, 1.6 times bigger than the amount settled in the same period last year. The government paid P239 billion to its creditors in September alone, up 15.46 percent compared with a year ago.

Broken down, 63.9 percent of the debt service bill last quarter went to principal payments amounting to P314.72 billion, up 9 percent year-on-year. From January to September, the government paid the principal amount of P940.19 billion, nearly double from a year earlier.

More expensive borrowings

The remaining 36.1 percent went to settling interest amounting to P177.67 billion in the third quarter, rising 24.45 percent year-on-year.  The Treasury said interest payments reached P460.12 billion in the first three quarters, 15.04 percent costlier than a year ago.

Analysts have said the Marcos administration could face more expensive borrowings amid rising interest rates following the aggressive tightening actions of the Bangko Sentral ng Pilipinas to fight resurgent inflation.

That could create a problem for a government that has to plug a projected budget deficit of P1.5 trillion this year, which is equivalent to 6.1 percent of gross domestic product (GDP).  Treasury data showed the government’s deficit-to-GDP ratio stood at 5.71 percent in the third quarter, still below the cap for this year.

Rising rates

Rising interest rates also risk diverting government funds from more productive spending to settling borrowing costs.  Treasury data showed interest payments cornered 18.2 percent of state revenues in the third quarter—representing money that could have been used to fund social programs and projects meant to supercharge the economy.

But so far, the government has made some progress in easing its debt burden.  Data showed the debt-to-GDP ratio, a closely-watched indicator of the government’s ability to settle its obligations, improved to 60.2 percent in the third quarter, from 61.0 percent in the second quarter.

The figure is now ahead of the government’s target of bringing the ratio down to 61.4 percent this year. At the same time, the Treasury said the ratio is on track to fall below 60 percent before 2025, or earlier than expected. INQ