The national government crafted a budget plan requiring far more scarce state resources as interest payments this year than as principal payment for debt, data culled from the latest Budget of Expenditures and Sources of Financing report of the Department of Budget and Management (DBM) show.
Experts say paying down more the principal obligation, especially where such debt are costly, rather than the interest component, is the preferred way to manage one’s obligations.
Under this year’s budget plan, the national government set aside a total of P647.27 billion for debt servicing purposes, with P334.87 billion as interest payments and only P312.40 billion as principal payments.
The debt service activities of the national government in May amounted to P78.38 billion, the bulk of which was used to amortize domestic obligations, the Bureau of the Treasury (BTr) said.
According to data from the BTr, the government debt pay downs in May of P78.38 billion expanded by 207.4 percent, from the P25.49 billion made in the same month for 2016.
Of the total, interest payments amounted P20.96 billion, an expansion by 12.3 percent from only P18.65 billion recorded in 2016, while amortizations reached P57.42 billion, or 740.7 percent, compared to P6.83-billion amortized payments in 2016.
Broken down, domestic amortization totaled P50.90 billion while foreign payments only reached P6.52 billion. Domestic interest payments accounted for P18.74 billion while foreign interest payments totaled P2.22 billion.
The government spent P16.46 billion for fixed-rate Treasury bonds (T-bonds), P1.88 billion for retail T-bonds, P378 million for maturing Treasury bills and other payments reaching P23 million during the month.
The government allots a portion of its budget to settle monthly obligations, debt payments form part of the government’s expenditures.
For the period of January to May, the government put up P353.32 billion as payment of its obligations, a contracted by 27 percent from payments made in the same period in 2016 amounting to P484.56 billion, according to BTr data.
Interest payments for the five-month period this year totaled P132.30 billion, which was lower than amortizations in the same period amounting to P221.02 billion.
Interest payments for the period contracted by 2.7 percent compared to the year ago figure of P136.02 billion.