The Department of Finance expects a significant reduction in interest rates next year.
The slowdown in the rate of increase in consumer prices is a key factor driving the expected decrease in interest rates.
Finance Secretary Benjamin E. Diokno said the government will remain opportunistic in its financing approach and take advantage of favorable financing opportunities.
National Treasurer Rosalia V. De Leon is trusted to make smart borrowing decisions in light of the favorable interest rate outlook.
The government does not plan to frontload its borrowing program for next year, as it currently has ample cash reserves.
Interest rates to drop next year — Diokno
At a glance
The Department of Finance (DOF) expects interest rates to go down next year as prices of things consumers buy are seen to rise at a much slower pace in the coming months.
During the Chat with SBED last Friday, Aug. 18, Finance Secretary Benjamin E. Diokno said borrowing money or getting a loan would be cheaper in 2024, but the government will remain opportunistic in its financing approach.
“With global inflation already past its peak and now returning to central bank targets, it is widely expected that interest rates will fall significantly next year,” Diokno told reporters.
But Diokno also said that the government does not plan to raise funds through frontloading before the end of the year, as it already has sufficient cash reserves.
Diokno added that National Treasurer Rosalia V. De Leon, being smart and discerning, will make prudent decisions regarding borrowing in response to the favorable interest rate outlook.
The national government plans to borrow P2.46 trillion in 2024, higher by 12 percent than this year's P2.2 trillion program.
Under the financing plan, the majority, approximately 75 percent or P1.845 trillion, will be sourced locally. The remaining balance of P615 billion, which accounts for 25 percent, will be sourced from overseas markets.
Likewise, the government has allocated P1.911 trillion for government debt service, a 23 percent increase compared to the P1.552 trillion program for this year.
The majority of the debt payments, accounting for 77.1 percent, are allocated to local creditors, amounting to P1.474 trillion. This represents an 18 percent increase from the P1.246 trillion program this year.
Out of that amount, P1.003 trillion will be used for principal amortization, while the remaining P470.68 billion will cover interest payments.
The government has also allocated a total of P437.61 billion to repay foreign creditors, a 43 percent jump compared to this year's allotment of P305.68 billion.
Within that program for foreign banks, P237.82 billion is allotted for principal amortization, while the remaining P199.79 billion is earmarked for interest payments.
The Marcos administration expects the national government's total outstanding debt to climb to P15.842 trillion by 2024 from this year's target of P14.623 trillion.
As of June 2023, the total debt of the national government already stood at P14.148 trillion, still short of the full-year program by 3.2 percent or P475 billion.