PH debt service bill slashed in April to P161.7B

Bureau of the Treasury

The Marcos administration’s debt service bill fell by a little over a fifth in April due to a big drop in principal payments, which offset an increase in interest settlements, data from the Bureau of the Treasury (BTr) showed.

The government paid P161.7 billion of its obligations in April, plummeting by 21 percent compared to the amount it settled a year ago.

That put the state’s four-month payments for liabilities to P1.1 trillion, larger by 49 percent and accounting for 60 percent of the government’s P1.91-trillion debt service plan for 2024.

Those payments for amortization and interest represent government funds that would have been better spent on more productive undertakings like infrastructure development and social programs.

Breaking down the BTr’s latest cash operations report, the contraction in debt settlements in April was mainly due to a 41-percent decline in amortization payments to P94.2 billion.

Of that amount, the state made P55 billion in principal payments to local creditors, down by 64 percent, while foreign lenders received P39 billion in amortization settlements, soaring by 680 percent.

Since the beginning of the year, the government paid the principal amount of P887.2 billion it owed to its creditors at home and abroad, marking a 52-percent increase.

Interest expense up

That decline in amortization payments cushioned the 46-percent spike in interest settlements in April to P67.5 billion. The amount included P46.4 billion spent on settling interest costs on local debts, growing by 67 percent, and P21 billion interest expense on foreign obligations, which posted a 13.5 percent increase.

Analysts have said the government could face more expensive borrowings amid a high-interest rate environment.

The good news is the Bangko Sentral ng Pilipinas (BSP) had recently hinted at two 25-basis-point rate cuts this year, with the first one possibly in August and ahead of the US Federal Reserve’s own easing move. This, as Governor Eli Remolona Jr. acknowledged that present liquidity conditions are tighter than necessary.

The Department of Finance (DoF) recently announced a bigger borrowing plan for this year at P2.57 trillion—from the old program of P2.46 trillion—as the government raises funds to plug a bigger-than-previously-expected budget hole of P1.5 trillion.

The debts are needed to bridge a fiscal deficit that is no longer expected to normalize to prepandemic level by the time President Marcos leaves office in 2028, as Finance Secretary Ralph Recto avoids new taxes. Moving forward, the DOF said the BTr developed a “strategic fundraising plan” that will continue to adopt a 75:25 borrowing mix in favor of domestic sources.—Ian Nicolas P. Cigaral INQ