The national government's debt payment in the first half of the year doubled after increasing its budget allocation for repaying loans that were nearing their maturity.

Data from the Bureau of the Treasury revealed that from January to June 2023, debt servicing amounted to P907.9 billion, a 98 percent increase compared to P458.35 billion in the same period last year.

Debt servicing refers to the repayment of borrowed money by the government, consisting of interest and principal payments.

According to the Treasury report, principal payments in the first semester surged to P625.5 billion from only P201.14 billion a year ago, primarily due to larger allocations to the bond sinking fund (BSF).

To mitigate the risk of depleting funds when long-term loans mature, the government established the sinking fund. Through this, the government can gradually repurchase a portion of existing bonds, resulting in a reduced final payment at the end of the loan term.

The government's expenditure for the BSF increased significantly from P152.3 billion last year to P529.16 billion between January and June.

As a result, the government's overall domestic amortization rose to P561.4 billion, a substantial increase from P153.37 billion the previous year.

Additionally, foreign principal payments amounted to P64.05 billion in the first half of this year, a 35 percent increase compared to P47.7 billion in the same period in 2022.

Meanwhile, interest payments from January to June increased by 10 percent to P282.46 billion compared to P257.21 billion in the previous year.

The Treasury said interest paid on foreign debt recorded a significant increase of 40 percent to P89.6 billion in the six-month period, compared to P64.05 billion in the previous year.

In contrast, interest on local debt fell by six percent, totaling P192.9 billion as of end-June from P205.7 billion in the previous year.

In June alone, debt payments of the national government reached P88.4 billion, up 99 percent from P44.28 billion in the same month last year.

For 2024, the government has allocated P1.911 trillion for 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.

However, Finance Secretary Benjamin E. Diokno explained that when evaluating debt payments, it is important to focus only on interest payments and net lending. 

For this reason, the finance chief clarified that only 12.1 percent of the proposed budget for Fiscal Year 2024, which is P699.2 billion, is designated for financing the debt burden, including net lending.

Data from the Department of Finance indicated that between 1986 and 2015, interest payments typically made up around 23.3 percent of the total national government expenditures.

However, this percentage dropped to an average of 10.1 percent between 2016 and 2022.

Due to a decline in interest payments, Diokno said the government now has more funds that can be redirected toward its priority programs. (Gabriell Christel Galang)