Government spends P505 B in 2014 to pay debt

MANILA, Philippines – The government spent P505 billion last year to pay portion of its debts, 7.9 percent lower than the P559 billion in the same period last year.

Data from the Department of Finance showed that P193.82 billion was used to pay principal obligations comprising P103.45 billion in domestic debts and P90.3 billion in foreign borrowings.

Total principal payment in 2014 was 17.7 percent lower than the previous year’s P235.6 billion.

The government also paid a total of P321.18 billion in interest, covering P220.49 billion in local loans and P100.69 billion in foreign obligations.

Debts incurred from the domestic market comprised P166.2 billion in fixed-rate Treasury bonds and P48.09 billion in retail bonds.

Total interest payment for the period was slightly lower than the P323.4 billion posted a year earlier.

In December alone, the government’s debt payments reached P35.25 billion, up from the P32.04 billion settled in the same month the previous year. This consisted of P28.93 billion in interest and P6.33 billion in financial obligations.

Finance officials said debt-management strategies coupled with efforts to shore up tax collections, have allowed the government to significantly trim its debt burden to a more manageable level.

The country borrows from the international and domestic market to supplement revenues and finance development programs.

The country’s outstanding debt stood at P5.7 trillion as of February, up three percent from the same month a year ago due to higher domestic obligations.

Domestic debts accounted for 66 percent of the total with external obligations making up the balance.

The country’s debt as a proportion of gross domestic product declined further last year, reflecting the government’s successful efforts to manage finances and ensure economic resurgence.

The Aquino administration’s goal is to reduce the debt-to-GDP ratio further to below 45 percent by the end of its term in 2016 from a peak of 78.1 percent during the 1997 Asian currency crisis.

The debt-to-GDP ratio, one of the key indicators closely watched by major international credit rating agencies, , has been on a downward trajectory in the past three years as the government stepped up efforts to manage the country’s debt. It is a measure of the government’s capacity to settle its obligations.

This continuing trend of decreasing general government debt-to-GDP ratio shows government’s efforts to ensure sustained fiscal space throughout the medium term. –Zinnia B. dela Peña (The Philippine Star)