Debt payments by the Philippine government breached the P1-trillion mark last year amid heightened borrowings during the prolonged pandemic, data from the Bureau of the Treasury showed.
From January to December 2021, the national government’s debt servicing amounted to P1.204 trillion, an increase of 30 percent compared with P926.46 billion in the previous year, the Treasury report stated.
Debt servicing refers to payments of both interest and principal. The debt service burden excludes actual outflows such as rescheduling or refinancing of existing debt and conversion of debt to equity.
Interest payments jumped by 13 percent to P429.43 billion last year from P380.41 billion in 2020.
Of the total, domestic and foreign interest payments reached P333.33 billion and P96.1 billion, respectively.
Payment of principal also rose 33 percent to P774.72 billion from P582.05 billion, consisting of domestic payments of P537.54 billion and foreign payments of P237.19 billion.
Meanwhile, the government paid off P69.9 billion worth of debts in December alone, lower by 5.2 percent against the P73.77 billion recorded in the same month a year earlier.
Last March, the Treasury bureau reported that the government’s total debt already exceeded the record P12 trillion threshold at end-January.
As the Philippines bogged down by prolonged Covid-19 pandemic, the government’s outstanding debt reached P12.03 trillion as of January 2022, up 16.5 percent or P1.7 trillion compared with P10.327 trillion in the same month last year.
According to the treasury bureau, the increase was driven by more borrowings from both local and foreign creditors.
Of the total debt stock, 69.6 percent were domestically borrowed, while the remaining 30.4 percent were loans sourced abroad.
Finance Secretary Carlos G. Dominguez III acknowledged that the more than two-year Covid-19 pandemic and its severe economic downturn resulted in a significant increase in government debt.
Dominguez admitted that a high level of government debt stock, now equivalent to 60.5 percent of gross domestic product (GDP), is not sustainable and should only be for temporary.
The Philippines’ debt-to-GDP ratio was slightly above the 60-percent threshold deemed as manageable for emerging markets.
For this reason, Dominguez said that the next administration should focus on how the government will repay the debt that piled up throughout the pandemic.