Lower principal payments cut debt service bill in February

Lower principal payments cut debt service bill in February

The government’s debt service bill went down by nearly a quarter in February, as costlier interest expense due to tight financial conditions was offset by lower amortization payments.

Data from the Bureau of the Treasury (BTr) showed total debt payments made by the Marcos administration in February amounted to P293.62 billion, falling by 21.9 percent year-on-year.

Overall, the February figure brought the government’s two-month debt service bill to P452.51 billion, up by an annualized rate of 6.85 percent. Dissecting the Treasury’s report, interest payments in February totaled P47.83 billion, fatter by 40.2 percent.


Of that amount, interest expense on domestic borrowings jumped by 56.71 percent to P34.35 billion, while that on external liabilities hit P13.48 billion, up by 10.6 percent.


But the heftier borrowing costs were cushioned by lower principal payments, which fell by 28 percent to P245.79 billion in February.

Broken down, amortization paid for onshore debts declined by 19.71 percent to P243.63 billion while that for foreign obligations plummeted by 94.3 percent to P2.16 billion.

Analysts have said the government could face more expensive borrowings amid a high interest rate environment that might stay for a longer period amid expectations of a delayed rate cut by the Bangko Sentral ng Pilipinas.

Based on latest figures, the Marcos administration is planning to borrow a total of P2.46 trillion from creditors at home and abroad in 2024 to help bridge its budget deficit, which is projected to hit P1.5 trillion this year.

Finance Secretary Ralph Recto said the government will remain “prudent” in its debt management by continuing to adopt a 75:25 borrowing mix in favor of domestic sources. That means that the borrowing program this year will be composed of local debts worth P1.85 trillion and foreign financing amounting to P606.85 billion.

Such a strategy, Recto explained, would “mitigate foreign exchange risks, take advantage of the abundant liquidity in the country’s financial system, and support the development of the local debt and capital markets.”


To diversify the state’s funding sources, Recto said the BTr is looking at various global bond markets, with a “potential curtain-raiser offering” in the first semester of the year.

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TAGS: Business, debt service

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