Gov’t spends 28% less on H1 debt payments

MANILA, Philippines - The government’s debt payments fell 28 percent to P227.5 billion in the first half from P316 billion in the same period last year amid the liability management initiatives of the Aquino administration.

Data from the Department of Finance showed that P67.77 billion was used to pay principal obligations comprising P1.26 billion in domestic debts and P66.5 billion in foreign borrowings.

Total principal payment from January to June was 57.2 percent lower than the previous year’s P159.25 billion.

The government also paid a total of P159.74 billion for interest, covering P109.05 billion in local loans and P50.59 billion in foreign obligations.

Total interest payment for the period was slightly higher than the P157.13 billion posted a year earlier.

In June alone, the government paid a total of P23.88 billion in financial obligations including P19.62 billion in interest.

Finance officials said debt-management strategies coupled with efforts to shore up tax collections, have allowed the government to significantly trim its debt burden to a more manageable level.

Under this year’s national budget, the government has set aside P352.65 billion to pay for interest on its outstanding debt.  The amount, which accounts for 15.6 percent of the state’s 2014 budget of P2.265 trillion, represents a decline in the proportion of the budget earmarked for debt servicing.

Budget Secretary Florencio Abad said the government is expected to shell out more investments in improving and upgrading infrastructure to be at par with its Asian neighbors.

The country borrows from the international and domestic markets to supplement revenues and finance development programs.

The country’s outstanding debt stood at P5.66 trillion as of May, up five percent from the same month a year ago.  Domestic debts accounted for 66 percent of the total with external obligations making up the balance.

The government aims to further reduce the ratio of its debt to gross domestic product to 45.6 percent next year through improved revenue collections and better management of funds.

The debt-to-GDP ratio, which peaked at 78.1 percent during the Asian currency crisis, stood at  49.2 percent in 2013 from 51.5 percent a year earlier.

The debt-to-GDP ratio, one of the key indicators closely watched by major international credit rating agencies, is a measure of the government’s capacity to settle its obligations.