High debt servicing to persist until 2024 — DOF

MANILA, Philippines — The country will continue to pay its debts beyond the ideal international threshold of 60 percent of domestic output until 2024, a top finance official said.

In an interview with reporters, Finance Undersecretary and chief economist Gil Beltran said the debt-to-GDP ratio could improve only by 2025 at the earliest.

Up to 2024, however, he admitted the country would exceed the cautionary mark of 60 percent.

“The debt won’t be far off from 60 percent. It would go a little bit over that, but it would go back to about 60 percent and below that in 2025,” Beltran said.

He said the government can only minimize the debt stock once lockdowns are lifted for good, as the economy picks up its growth pace when trade and industries can move without restrictions.

“(Recovery) can even be earlier, because we expect the economy to surge upward as soon as the lockdowns are taken out. The factors of production are there, it’s just that they cannot move. Once you remove blockades, checkpoints and restrictions, the economy will boom significantly,” Beltran said.

The government plans to spend P1.79 trillion for debt service in 2021, with P1.26 trillion allotted for amortization or returning the principal, and another P531.55 billion set aside for paying interest.

Debt payments in the first semester swelled by over 41 percent to P773.78 billion from P547.34 billion during the same period last year. Amortization made up 73 percent of the total at P565.25 billion, while interest payments accounted for the rest at P208.53 billion.

Finance Secretary Carlos Dominguez III earlier said the debt-to-GDP ratio should land at 59.1 percent by the end of the year. However, it is projected to breach the international threshold of 60 percent in 2022 at 60.8 percent.

He vowed the government would maintain financial prudence in paying off the debt it piled up to improve health infrastructure and expand social services.

Dominguez said debt service for this year would amount to 6.3 percent of GDP, 5.9 percent in 2022, 6.6 percent in 2023 and seven percent in 2024.

The Department of Budget and Management will submit a proposed budget for 2022 amounting to P5.024 trillion, of which roughly 12 percent or P601.4 billion will be set aside to pay creditors.