Lower debt service bill thanks to lower principal repayments

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THE NATIONAL GOVERNMENT spent 42.975 billion pesos to pay its debt in April, going from one a year ago, as it meantIflooking forward lower principal repayments while paying out more for interest, according to data from the Office of the Treasury (BTr).

The BTr reported that the government’s debt service bill in April was down 33.15% from 64.29 billion pesos in April 2021 and 36% from the 67.389 billion pesos seen in March. 2022.

Of the total debt service bill for April, more than 86% went to paying interest and the rest was spent repaying borrowed principal.

Interest payments in April rose 56.61 percent to 37.303 billion pesos from 23.819 billion pesos in the same month a year ago.

Disaggregated, payments made for interest on domestic borrowing soared more than 70 percent year-on-year to 29.86 billion pesos.

Domestic interest payments consisted of Pula 24.626 billion for fixed rate treasury bills, Pula 3.575 billion for retail treasury bills and Pula 1.32 billion for treasury bills.

Meanwhile, interest expense on the government’s external debt increased by 17.85% to 7.45 billion pesos.

On the other hand, principal payments for April fell 86 percent to 5.672 billion pesos from 40.469 billion pesos in the same month last year. This consisted entirely of external debt payments.

From January to April, the national government’s total debt service bill was 356.625 billion pesos, down nearly 40% from 585.80 billion pesos a year ago, as it has spent less to repay the principal of its obligations.

Principal debt payments accounted for 47.66% of the total bill for the period, while interest charges took up the remaining 52.33%.

Broken down, depreciation for the period fell 61% to 170 billion pesos from 436.12 billion pesos a year earlier.

Payments made for domestic debt totaled 153 billion pesos in Iffirst four months of 2022, a decrease of 47% compared to 291 billion pesos a year earlier, while foreign bond redemption expenses amounted to 16.98 billion pesos, down 88% compared to 145.10 billion pesos recorded in the same period last year.

Meanwhile, interest payments for the four-month period increased by 24.69% to 186.632 billion pesos.

The government plans to spend 1.298 billion pesos on debt payments this year, with 785.21 billion pesos to repay the principal amount of its borrowings and the remaining 512.59 billion pesos scheduled for interest expense.

The Philippines recorded a debt-to-gross domestic product (GDP) ratio of 63.5% in the first quarter. This is higher than the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies.

Finance Secretary Carlos G. Dominguez III said it would take 10 years to bring that ratio back to pre-pandemic levels.

The government expects the economy to grow by 7-9% this year. Philippine GDP grew 8.3% faster than expected during the Iffirst trimester. — T. J. Tomas

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