By means of Aubrey Rose A. Inosante, Reporter
NATIONAL GOVERNMENT (NG) debt service rose sharply in October as domestic loan repayments rose, the Bureau of the Treasury (BTr) reported.
The latest data from BTr shows that debt service stood at P216.85 billion in October, up 179% from P77.76 billion in the same month last year.
Month-on-month, debt service also rose 131.65%, compared to P93.61 billion in September.
Debt service refers to payments made by the government on domestic and foreign loans.
The largest share, or 74.46%, of debt payments in October consisted of principal payments, BTR data shows.
Depreciation rose 759.89% to P161.46 billion in October from P18.78 billion in the same month last year.
Broken down, domestic debt repayments rose sharply from P1.94 billion in 2023 to P120 billion in October.
External debt repayments rose 146.29% to P41.46 billion in October from P16.84 billion in the same month a year ago.
On the other hand, interest payments fell 6% to P55.39 billion in October from P58.98 billion in the same month last year.
Domestic interest payments fell 10.82% to P35.33 billion in October from P39.62 billion last year.
Interest paid to foreign creditors rose 3.56% to P20.05 billion in October from P19.36 billion in the same month in 2023.
Broken down, domestic interest payments are composed of P27.27 billion in fixed-rate government bonds, P3.58 billion in retail government bonds, P2.77 billion in treasury bills (T-bills) and others (P1.73 billion).
“The increase in depreciation may be caused by various factors. First, an increase in national debt maturing that month,” said Philip Arnold “Randy” P. Tuaño, dean of the Ateneo School of Government. Business world in an email.
Mr. Tuaño said a significant portion of the debt matured in October, “it would have required the government to repay the principal amounts to creditors.”
He also attributed the increase in depreciation to the lower interest rate environment in October, which may have led to the government prepaying some of the higher interest debt.
The Bangko Sentral ng Pilipinas began its easing cycle in August, amid slower inflation. In August, rates were cut by 25 basis points (bps), and in October by a further 25 basis points, bringing the benchmark rate to 6%.
The Monetary Board is expected to cut the target reverse repurchase (RRP) rate by 25 basis points at its meeting on December 19, 13 of 16 analysts said in a report. Business world poll from last week. If this is achieved, it would bring the reference interest rate from the current 6% to 5.75%.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the sharp year-on-year decline in debt servicing costs was due to “larger Treasury bond maturities.”
For the remaining months, Mr Ricafort said there would be a “seasonal reduction” in maturing government bonds due to “reduced auctions of government bonds and government bonds in view of the festive season, especially in the last half of December, as has been the case for many has been consistently observed for years. .”
During the first ten months of the year, the NG debt service bill stood at P1.86 trillion, up 25.88% from P1.48 trillion in the same period last year.
Depreciation payments accounted for 65.67% of the 10-month total. It rose 27.42% to P1.22 trillion at the end of October from P958.96 billion a year ago.
Domestic debt repayments rose 17.07% to P999.74 billion, while external payments rose 111.6% to P222.22 billion.
On the other hand, interest payments rose 23.03% to P638.68 billion in the first ten months from P519.11 billion a year ago.
Interest payments on domestic debt amounted to P453.46 billion, while those on external debt amounted to P185.22 billion.
At the end of October, domestic interest payments included P296.49 billion in fixed-rate government bonds, P117.87 billion in retail government bonds, P28.4 billion in government bonds and others (P10.71 billion).
NG debt rose to a new high of P16.02 trillion at the end of October.