Government pays record P1.3 trillion debt in 2022

MANILA, Philippines — The country’s debt service hit a record P1.3 trillion last year as the government moved to cut borrowings incurred during the pandemic.

Data from the Bureau of the Treasury showed the government hiked its debt payments in 2022 by 7.4 percent to P1.29 trillion from P1.2 trillion it paid in 2021.

For December alone, the government settled P302.13 billion in order to meet and slightly exceed the debt service programmed at P1.26 trillion under the General Appropriations Act last year.

The Treasury said the debt service was driven by the 17 percent increase in interest payments to P502.86 billion from P429.23 billion in 2021.

On the other hand, amortization, or the settlement of principal, inched up by two percent to P790.32 billion in 2022 from P774.64 billion the year prior.

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

Nearly 80 percent of the interest payments at P383.45 billion were issued to domestic creditors.

Broken down, the government paid the interest for P231.14 billion in fixed-rate Treasury bonds (T-bonds), P135.5 billion in Retail T-bonds and P12.65 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 over 20 years.

Aside from payment to local lenders, the government settled P119.41 billion in interest owed to foreign financiers last year.

Meanwhile, about 83 percent of the total amortization, at P659.83 billion, was remitted to domestic sources while the remaining P130.49 billion in principal payments were made to external creditors.

Data showed the government paid 98 percent of the interest payments it set for last year, missing by some P9.73 billion from the programmed P512.59 billion.

However, it managed to exceed its payments for amortization by five percent or P39.24 billion from the original target of P751.08 billion.

This brought the total debt service to P1.29 trillion, up by almost P30 billion from the P1.26 trillion that the government has set aside.

For this year, the government intends to spend P582.32 billion for interest payments on a 77:23 mix in favor of domestic creditors.

It will also return P1.02 trillion worth of principal to comply with the amortization of debts mostly to local lenders.

This means that for this year, the government targets to hit another record P1.6 trillion in debt service expenditure.

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.

Currently, the country’s outstanding debt is at a record P13.7 trillion as of end-January.