Government trims debt payments in August

MANILA, Philippines — The Marcos administration trimmed its debt payments during its second month in office amid a decline in principal amortization.

Data from the Bureau of the Treasury showed the government cut its debt payments by nearly 10 percent to P68.3 billion in August from P75.09 billion in the same month last year.

For the first eight months, debt payments also went down by 25 percent to P682.85 billion from P909.33 billion a year ago.

This means the end-August debt payment is just 52.5 percent of the P1.3-trillion debt service allotment for 2022, leaving the other half of the debt or P617.25 billion to be paid in the last four months of the year.

Further, data from the Treasury showed that amortization or the settlement of principal dropped by 27 percent to P37.52 billion in August from P51.15 billion in 2021.

On the other hand, interest payments increased by 28.5 percent to P30.77 billion during the month. The bulk of the interest payments at P20.39 billion were issued to domestic creditors.

Spending on amortization goes to returning the loan principal, while interest payments go to complying with interest obligations.

The government paid the interest for P11.19 billion in fixed-rate Treasury bonds (T-bonds), P7.94 billion in retail T-bonds and P1.08 billion in Treasury bills (T-bills).

The Treasury sells government securities every week to generate funding for public programs and projects. Short-dated T-bills have tenors of 91 days, 182 days and 364 days while long-term T-bonds have maturities of up to 20 years.

Aside from payment to local lenders, the government settled P10.38 billion in interest owed to foreign financiers during the month.

Meanwhile, 61 percent of the amortization at P22.78 billion was remitted to domestic creditors, with the remaining P14.75 billion in principal payments made to external sources during the period.

For this year, the government plans to settle a record P1.3 trillion in debts, divided into P512.59 billion for interest payments and P785.81 billion for amortization.

Debt payments swelled by 25 percent to P1.2 trillion last year from P962.47 billion in 2020, as the government started paying off some of the loans it acquired for pandemic response.

The government intends to improve its revenue administration and eliminate wasteful spending to consolidate its fiscal position and, in the process, bring down the debt pile.