Debt payments down 41% in H1

Published August 14, 2022, 5:00 PM

by Chino S. Leyco

Debt payments down 41% in H1

Debt payments by the national government went down by 41 percent in the first semester of the year due to lower amortization, data from the Bureau of the Treasury showed.

The national government’s debt servicing reached P458.35 billion in January to June this year, falling by 41 percent compared with the P773.7 billion paid out in the same period last year.

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.

Payment of principal dropped by 64 percent to P201.14 billion from P565.17 billion in the first six-months last year.

During the period, principal payments consist of domestic payments amounting to P153.37 billion, down 62 percent from P405.14 billion in the previous year.

Offshore debt payments, meanwhile, hit P47.75 billion at end-June, a decline of 70 percent compared with P160.02 billion.

On the other hand, interest payments rose by 23 percent to P257.21 billion in January to June from P208.53 billion in 2021.

Of the total, domestic and foreign interest payments reached P205.69 billion and P51.23 billion, respectively.

In June alone, debt payments amounted to P44.28 billion, down 72 percent compared with P159.19 billion a year ago.

Of that amount, interest and principal payments reached P36.75 billion and P7.53 billion, respectively.

Earlier, the Treasury reported that the outstanding debt of the national government rose 14.6 percent at end-June 2022 to P12.791 trillion from P11.166-trillion in the previous year.

But despite the rise, the Department of Finance assured that the government can still gradually bring down its debt ratio to 52 percent level by the end of the Marcos administration.

For 2022, the debt-to-gross domestic product (GDP) ratio is expected to drop to 61.8 percent before dropping further to 61.3 percent next year.

By 2024, the debt ratio is seen at 60.6 percent, and would hit the internationally accepted threshold of 59.3 percent by 2025.

In 2026, debt to GDP ratio should settle at 57.7 percent and ultimately, 52.5 percent by 2027.

“In other words, by the end of the Marcos years, we expect that national debt to GDP ratio to be below 60 percent,” Finance Secretary Benjamin E. Diokno said.

According to Diokno, debt level of above 50 percent is not detrimental, citing the current global debt to GDP ratio is somewhere between 200 percent and 300 percent.

“This kind of debt structure has nothing to worry about. This is one of the lowest among even emerging economies,” Diokno said. “Skies are not falling because our GDP ratio is 62 percent.

As of end-June 2022, the country’s debt-to-GDP ratio stood at 62.1 percent.