Debt payments shrink by double digits in Q1

government has shown no sign of narrowing the national debt anytime soon as it trimmed its debt payments by double digits in the first quarter.

In a report, the Bureau of the Treasury said debt service declined by 40 percent to P313.65 billion in the first quarter, from P521.51 billion a year ago.

On a yearly basis, interest payments rose by 29 percent to P149.33 billion from P125.86 billion, but amortization dropped by 58 percent to P164.32 billion, from P395.65 billion.

The bulk of the interest payments at P113.63 billion were paid to domestic creditors, particularly for fixed-rate Treasury bonds (P80.45 billion) and Retail Treasury bonds (P28.46 billion). On the other hand, the remainder were remitted for Treasury bills and other obligations at P4.25 billion and P466 million, respectively.

The other portion of the interest payments at P35.7 billion were settled to foreign financiers. By month, interest payments amounted to P65.55 billion in January, P28.23 billion in February and P55.55 billion in March.

Local lenders received 93 percent of amortization or the return of principal at P153.02 billion, while external sources obtained the remaining seven percent at P11.31 billion.

On the domestic front, nearly all of the amortization at P152.29 billion was paid for the redemption of bond sinking funds. The government also recorded P466 million and P260 million in amortization for agrarian reform beneficiaries and domestic bond exchange, respectively.

The Treasury said the lion’s share of amortization at P150.29 billion was issued in January. The government also returned principal worth P2.19 billion in February and P11.84 billion in March.

The government has to cough up P984.14 billion for the next three quarters to complete its debt payments for the year. For 2022, the government eyes to service a record P1.3 trillion of debt, of which P512.59 billion is for interest payments and P785.21 billion for amortization.

The debt service went up by 25 percent to P1.2 trillion last year, from P962.47 billion in 2020 as the government started paying off some of the borrowings it acquired for pandemic response.

The debt pile is now past the sustainable level of 60 percent of the economy, spiking to a 17-year high of 63.5 percent in the first quarter due to double-digit increases in both domestic and external obligations.