Debt servicing down 40%

GOVERNMENT debt servicing dropped by almost 40% annually in August due to a decline in principal payments made in the month, data from the Bureau of the Treasury showed.

The government spent a total of P40.888 billion to cover its principal and interest payments to its creditors in August, 38.32% less than the P66.294 billion recorded in the same month last year.

Principal payments made in the month declined by 51.25% to P22.658 billion against the P46.478 billion disbursed in August 2012.

The bulk of this amount was paid to foreign lenders at P22.564 billion while the remaining P94 million went to domestic creditors.

Meanwhile, interest payments made in August likewise declined by 8% to P18.23 billion from the P19.816 billion paid in the same month last year.

Of this total, the government paid P12.613 billion in interest to local lenders, and P5.617 billion went to external creditors.

In the breakdown, of the interest payments to domestic lenders, P11.316 billion went to holders of fixed-rate Treasury bonds.

Holders of retail Treasury bonds were also paid P1.213 billion while Treasury bills holders accounted for P75 million. The remaining P9 million went to interest payments for other domestic liabilities of the government.

From January to August, debt payments totaled P425.085 billion, 16.92% less than the P511.684 billion disbursed in the same period last year, the data showed.

Principal payments made in the first eight months dropped by more than a third year-on-year to P196.21 billion from last year’s P290.569 billion.

Of this total, P98.627 billion was paid to local creditors while P97.583 billion went to foreign creditors.

Interest payments in the eight months ending August, meanwhile, rose slightly to P228.875 billion from the P221.115 billion recorded in the same period in 2012.

Disbursements to domestic lenders accounted for the bulk of this total at P151.941 billion while the remaining P76.934 billion went to foreign lenders.

A significant portion of the national budget goes to interest payments on debt, while principal payments are off-budget items covered by debt refinancing.

Public spending reached P133.2 billion in August, bringing the eight-month tally to P1.222 trillion, 12.63% higher than the P1.085 trillion disbursed in the same period last year.

According to the national budget, the government is programmed to spend P767.394 billion for debt servicing this year, with P435.185 billion allotted for principal payments and the remaining P332.209 billion, for interest payments.

In 2012, the government spent a total of P729.774 billion to service its debts, slightly more than the P722.75 billion disbursed the year before.

The national government’s outstanding debt grew by 6.9% year-on-year to P5.451 trillion as of June, up from the P5.101 trillion recorded as of the same month in 2012. -- Bettina Faye V. Roc

source:  Businessworld