Philippines’ debt service falls to P93.6 billion in September 2024

Debt service, which refers to the money required to cover the payment of interest and principal on loans, of the Philippines falls in the first nine months of 2024 due to lower maturing debts, according to the data of the Bureau of the Treasury (BTr). INQUIRER FILE PHOTO

The cost of servicing government debt shrunk in the first nine months due to lower maturing debts, data from the Bureau of the Treasury (BTr) showed.

The government settled P93.6 billion of its obligations in September, down by 60.8 percent from the P239 billion it paid to creditors in the same period last year, according to figures.

This led to a 17.4 percent increase in payments for the first nine months, rising to P1.64 trillion from P1.40 trillion in the same period last year.

Debt service refers to the money required to cover the payment of interest and principal on loans.

In September, 78.9 percent of government debt servicing consisted of interest payments.

READ: PH government debt rises to P15.89T in September

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the lower debt payments to fewer maturing debts but noted that the government will face higher costs in the following months, especially due to the weaker peso.

“Towards the end of 2024, there would be seasonally lower among maturing government securities and issuances, so this could lead to some reduction in national government debt servicing costs especially from November to December,” Ricafort told Inquirer.

Ricafort also added this will be partly offset by expected rate cuts from the Federal Reserve, other global central banks, and the Bangko Sentral ng Pilipinas (BSP). These rate cuts are expected to help lower the government’s debt servicing costs, particularly for interest payments.

On Oct. 16., the BSP cut the benchmark rate—which banks typically use as a guide when charging interest on loans—by a quarter point to six percent.

Governor Eli Remolona Jr. said another 25-basis point rate cut is possible at the Monetary Board meeting on Dec.19 emphasizing that the BSP will seek a “measured” transition to a less restrictive monetary policy.

READ: 7-mo gov’t debt servicing cost soared 40.2% on high rates

The Philippine government’s interest payments in the first nine months climbed by 26.8 percent to P583.29 billion from P460.12 billion a year ago. Broken down, interest payment for external debt stood at P165.17 billion.

Meanwhile, amortization of debt, which made up 21.1 percent of the total amount, declined by 88.2 percent to P19.76 billion in September. Year to date, it went up by 12.8 percent to P1.06 trillion.

Amortization of domestic debt stood at P879.74 billion and external debt, at P180.76 billion, in the January-to-September period.