Manila’s payments for debt up

BY Lailany P. Gomez, Reporter
THE government’s debt servicing inched up in the first 10 months as principal payments for foreign obligations climbed during the period.
Based on the latest data from the Bureau of Treasury, the government’s debt servicing—which refers to payments of both interest and principal—rose by less than a percent to P574.72 billion at end-October this year from last year’s P570.37 billion. The debt service burden excludes rescheduling or refinancing of existing debt and conversion of debt to equity. The burden includes the prepayments.
In October alone, debt servicing dipped 22.13 percent when the government disbursed only P25.71 billion compared with last year’s P33.02 billion. The bulk of the payments at end-October were for the principal amount and was worth a combined P325.31 billion, or 10.76 percent higher than last year’s P318.08 billion. Of the total amount, P235.22 billion was used to settle domestic loans, a little below last year’s P247.61 billion, while the P90.08 billion went to payments for foreign loans, which climbed 27.84 percent to P70.46 billion year-on-year.
Principal payments for October alone declined by 25 percent to P11.58 billion from P15.43 billion the previous year. However, interest payments during the period went down 1.15 percent to P249.41 billion. Of the total amount, P142.62 billion was spent on domestic loans, or 16.34 percent lower than the P170.47 billion paid the same period last year. Interest payments for foreign loans, however, went up 10.12 percent to P106.80 billion.
In October alone, the government disbursed at least P14.13 billion for interest payments, or 19.66 percent lower than last year. With the latest figure, the government is P125 billion shy of its P700.6 billion allocation for debt payments this year. This allocation is higher than the P681.5 billion programmed earlier and is equivalent to 8.3 percent of the country’s gross domestic product (GDP). An indicator of economic performance, GDP is the amount of goods and services produced in the country.
Debt servicing is a major item in the national budget because the government relies heavily on foreign and domestic borrowings to plug its widening budget deficit and to finance its maturing obligations. At end-October, the government already breached its P250-billion budget deficit ceiling, with the gap widening to P266.1 billion because of poor tax collections and weak imports.
The Department of Finance said the worst-case scenario was the fiscal gap widening to P300 billion, but the likely scenario was a P280-billion deficit, taking into account the full impact of damage caused by the two typhoons that hit the country in September and October.