The debt service bill will increase in May

THE NATIONAL GOVERNMENT (NG) The debt service bill rose year over year in May due to an increase in interest payments, the Bureau of the Ministry of Finance (BTr) said.

Treasury Department data showed that debt payments rose 40.64% to P68.98 billion in May, compared to P49.05 billion in the same month a year ago.

Month-on-month, debt payments fell 57.34% from P161.7 billion in April.

Debt service refers to payments that the government makes on its domestic and foreign debts.

The majority (88.57%) of May’s debt service went to interest payments.

Interest payments rose 47.78% to P61.1 billion in May from P41.34 billion in the same month a year ago.

Interest paid on domestic debt rose 56% to P46.07 billion from P29.53 billion a year ago.

Meanwhile, interest payments to foreign creditors rose 27.18% to P15.03 billion in May from P11.82 billion a year ago.

On the other hand, repayments rose 2.34% to P7.88 billion from P7.7 billion last year.

Month-on-month, depreciation fell 92%, compared to P94.2 billion in April.

Broken down, domestic debt write-downs fell 96.8% to P85 million in May from P2.66 billion a year ago.

Principal payments on external debt rose 54.51% to P7.8 billion in May from P5.05 billion last year.

FIVE MONTHS
In the first five months of the year, the NGs Debt service rose 48% to P1.22 trillion from P819.53 billion in the same period a year ago.

Depreciation payments rose 51.73% to P895.13 billion in the first fifive months compared to P589.95 billion a year ago.

Domestic debt repayments reached P754.86 billion, while those on external debt stood at P140.27 billion.

Meanwhile, interest payments rose 40.08% to P321.59 billion in the January-May period from P229.57 billion a year earlier.

Broken down, interest on domestic debt reached P231.38 billion, while interest payments on foreign debt reached P90.21 billion.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said higher debt payments in May could be due to higher interest rates and the weaker peso.

“The higher NG debt service bill could be attributed to higher interest rates that increased borrowing costs/financing costs,” he said via Facebook Messenger.

Mr. Ricafort said the weaker peso exchange rate increased the peso equivalent of foreign debt and debt service.

The peso closed at P58.52 against the dollar at the end of May, declining by P0.94 from its P57.58 Fready from the end of April.

The Bangko Sentral ng Pilipinas has kept its key policy rate at a more than 17-year high of 6.5% since October 2023.

The higher debt payments could also have an impactFlect the broader budgetFicit, said Mr Ricafort.

The NG’s budget deficit rose by 43.1% to 174.9 billion euros in May, while expenditure exceeded revenues, BTr said. In the first fFive months into the year, the budget deficit increased by 24.06% to 404.8 billion euros, compared to 326.3 billion euros a year ago.

“There could also be some payment on some multilateral foreign debts, as well as some maturity on some local government securities/debts,” Mr Ricafort said.

At the end of May, the NG’s debt reached a record high of P15.35 trillion, with P10.44 trillion coming from domestic sources and P4.9 trillion from foreign sources. — Beatriz Marie D. Cruz