Gov’t debt metrics stable in Aug – BTr

Interest rates of national government debt remained stable in August despite external uncertainties.

In terms of average interest rate, obligations fetched a lower 5.05 percent in August, slightly down from July and was the lowest for the year matching April’s level, data from the Bureau of the Treasury showed.

Broken down, external liabilities had lower interest of 4.47 percent, while their domestic counterparts carried a 5.36 percent.

Debt interest barely changed from the previous month as the bulk, equivalent to 91.54 percent of total, had fixed rates, unaffected by market swings.

Only around 8.3 percent have floating rates, while the remaining 0.15 percent was interest free.

Global financial markets were rattled going into September, as uncertainty surrounding the US Federal Reserve’s decision drove away investors from emerging markets like the Philippines.

This, in turn, resulted into lower demand for local papers, coupled with stock and foreign exchange market sell-offs.

While the US Fed eventually kept interest rates steady, it is still expected to raise rates by December.

According to Treasury data, a total of 66.7 percent or P3.88 trillion of state debts was denominated in pesos.

Meanwhile, a third or P2.1 trillion was in foreign currencies.

More local obligations mean the debt pile is generally safe

from foreign exchange movements that increase or decrease the value of those in other units.

In addition, 89.6 percent or P5.36 trillion were classified as “long-term” debts or those payable for more than 10 years.

Only 5.5 percent or P327.16 billion were due over the “medium-term” or in less than 10 years while a lower 4.9 percent or P293.02 billion were “short-term” or should be settled within 12 months at the most.

Longer payment terms allow the government to funnel more funds to finance social and public projects, instead of meeting obligations.