Thursday, April 10, 2014

Gov’t debt payments increase 86% in January due to principal settlements

by Chino Leyco
Manila Bulletin

April 9, 2014The national government debt payments in January this year increased by more than three-fourths on the back higher settlements of its principal obligations.

Data from the Bureau of Treasury showed yesterday that the government settled P208.44 billion worth of debt in January, an increase of 86 percent compared with P111.73 billion in the same month last year.

In January, the government’s interest payments slightly grew by 3 percent year-on-year to P56.46 billion from P54.84 billion. Of that amount, it paid P29.66 billion to local investors, while the remainder P26.8 billion was to offshore lenders.

Meanwhile, the government’s principal payments increased by more than double in January to P151.98 billion from P56.89 billion in the same month of 2013. Of the total, the state paid P107.93 billion in local debt and P44.05 billion.

The government’s principal payments to local investors increased by 95 percent year-on-year in January from P55.22 billion.

In 2013, the government debt servicing dropped 23 percent to P559.02 million from P730 million a year before.

Last year, interest payments accounted for P323.43 billion while P235.58 billion was used to pay principal obligations.

The treasury bureau earlier said that the national government’s debt as a proportion of the country’s whole economy slid last year on the back of the Aquino administration’s liability management program.

The government outstanding debt as a percentage of the economy, as measured by gross domestic product (GDP), declined by 2.3 basis points to 49.2 percent from 51.5 percent in the previous year.

The debt-to-GDP ratio, one of the key indicators closely watched by major international credit rating agencies, is a measure of the government’s capacity to settle its obligations.

According to the treasury bureau, both external and domestic debt ratios fell to 16.9 percent and 32.3 percent of GDP from previous levels of 18.6 percent and 32.8 percent, respectively.

“These developments highlight greater resiliency and sustainability in the trajectory of the national government debt,” the treasury bureau said.

The drop in debt-to-GDP ratio is in line with Aquino administration’s goal of reducing it to below 45 percent by 2016, which will be driven by the government’s effort to boost further its tax collections through efficiency as well as proactive debt liability management agenda.

Since the Aquino administration took office in 2010, the government debt-to-GDP ratio has been in a declining trajectory from a high of 54.8 percent in 2009.

In 2013, the national government debt increased by 4.5 percent year-on-year to P5.681 trillion from P5.437 trillion due to higher domestic obligations.

Of the total debt, P1.948 trillion or 34 percent was from foreign creditors, while the remainder P3.733 trillion or 66 percent was sourced from domestic creditors.

As of December last year, the government domestic debt increased by 7.6 percent year-on-year, while external debt fell by 1.1 percent, which the treasury said is in line with the government’s financing program of focusing on local borrowing.

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