THE NATIONAL GOVERNMENT (NG) debt servicing obligations climbed to P2.02 trillion in 2024 as both interest and amortization expenditures rose, as reported by the Bureau of the Treasury (BTr).
Data from the Treasury indicated that the NG’s debt repayments grew by 26% to P2.02 trillion last year from the P1.604 trillion noted in 2023.
Nonetheless, it did not meet the P2.027-trillion target for debt repayments by 0.3% last year.
Debt service encompasses the payments made by the NG on its local and international borrowings.
A majority or 62.22% of total debt expenditures were attributed to amortization payments.
Principal repayments surged by 28.92% to P1.26 trillion in 2024 from P975.28 billion the previous year. This was 0.47% lower than the BTr’s P1.263-trillion objective for the year.
Amortization for domestic debt increased by 19.18% yearly to P1.018 trillion, while principal repayments on foreign debt soared by 97.58% to P239.293 billion last year.
Conversely, interest payments rose by 21.48% to P763.31 billion in 2024 compared to P628.33 billion in 2023. This was 0.02% lower than the P763.437-billion target for the entire year.
Interest paid on domestic debt increased by 23.89% to P539.83 billion in 2024 from P435.74 billion in 2023.
Specifically, of this amount, P340.5 billion was allocated for interest on fixed-rate Treasury bonds, P153.92 billion on retail Treasury bonds, and P32.69 billion on Treasury bills.
For external debt, interest payments rose by 16.04% to P223.48 billion from P192.59 billion the prior year.
DECEMBER DEBT SERVICE
In December alone, debt repayments declined by 3.73% to P66.3 billion from P68.87 billion compared to the same month in 2023.
Month on month, interest payments fell by 29.25% from P93.7 billion in November.
Amortization payments increased by 1.61% to P8.32 billion in December last year from P8.19 billion in December 2023. This was entirely comprised of principal repayments on external debt, as no payments were made on domestic debt in December.
Meanwhile, interest paid on domestic borrowings decreased by 4.45% to P57.98 billion in December compared to P60.68 billion in the same month in 2023.
In detail, interest payments on retail Treasury bonds amounted to P19.18 billion, while fixed-rate Treasury bonds stood at P14.51 billion and Treasury bills at P2.27 billion.
Interest payments on external debt jumped by 19.93% year on year to P20.54 billion in December from P17.13 billion in 2023.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort stated that the increased debt servicing illustrates the rising repayment obligations on the substantial debt accumulated by the government during the coronavirus disease 2019 (COVID-19) pandemic.
As of the end of 2024, the NG’s total outstanding debt amounted to P16.05 trillion, reflecting a 9.8% increase from the end-2023 level.
“(The) still relatively higher interest rates and weaker peso exchange rate since the onset of the Russia-Ukraine war in February 2022 have also enhanced debt servicing, particularly interest obligations. Additionally, (the) elevated peso equivalent for foreign/external debts amid a weaker peso during this period (from P51 levels in early 2022, or at least 12% weaker since then),” he explained.
Mr. Ricafort mentioned that the anticipated rate reductions by the US Federal Reserve would “somewhat aid in lowering external debt servicing costs in the future.”
“However, this would be counterbalanced by [Donald] Trump’s higher US import tariffs and other protectionist measures that could potentially limit Fed rate cuts,” Mr. Ricafort noted.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., expressed expectations for an increased debt servicing requirement this year primarily owing to external debt obligations.
“Nevertheless, I anticipate that in 2025, foreign loan repayments will be the primary driver rather than domestic borrowing repayments as the Philippine peso is projected to depreciate in comparison to the dollar, resulting in higher repayments necessary to fulfill the nation’s financial commitments,” he stated. — A.R.A. Inosante
