THE decline in interest payments could lead to more funding for other government programs, the Department of Finance (DoF) said.
“Interest payments have been declining, freeing up fiscal resources which can be reallocated to support the government’s priority programs,” the DoF said in a statement on Tuesday.
The DoF estimates that interest payments accounted for 10.1% of the National Government’s (NG) expenditures between 2016 and 2022, much lower than the 23.3% share between 1986 and 2015.
NG interest payments in the five months to May rose 4.1% year on year to P229.574 billion, according to the Bureau of the Treasury.
Interest on domestic debt declined 11.5% to P152.604 billion, while interest on foreign debt rose 60% to P76.97 billion.
Finance Secretary Benjamin E. Diokno noted that interest payments are equivalent to 11.6% or P670.5 billion of the 2024 budget.
“This allows us to spend more on socioeconomic programs and projects in our priority sectors such as education and infrastructure,” he said.
“When assessing the debt burden component of the budget, it is crucial to solely consider interest payments and net lending,” he added.
A total of 12% or P699.2 billion of the proposed budget has been allocated to address the debt burden.
In the first five months, the NG debt service bill nearly doubled to P819.526 billion. Some 71.99% of the debt service bill consisted of amortization payments.
The DoF said amortization payments are “not included in the expense item since they are not classified as expenditure; hence they are not automatically appropriated.”
“The settlement of debt obligations incurred from expenses was recorded in the past. Therefore, principal amortization only represents the fulfillment of financial responsibilities arising from previously recorded expenses,” Mr. Diokno said.
According to the Budget of Expenditures and Sources of Financing report, the NG’s principal payments next year are projected at P1.24 trillion.
The government is projecting the NG debt-to-gross domestic product (GDP) ratio to decline to 60% by the end of 2024.
At the end of March, outstanding debt as a share of GDP was 61%, still above the 60% threshold considered manageable by multilateral lenders for developing economies.
The NG’s borrowing plan amounts to P2.46 trillion next year. This is 11.5% higher than the P2.207 trillion set for this year. — Luisa Maria Jacinta C. Jocson