MANILA, Philippines – The government’s debt servicing requirements will decline slightly next year because of prudent and efficient public financial management and decreasing principal payments.
Documents from the Department of Finance show that out of the proposed 2015 national budget of P2.61 trillion, the government would spend P763.25 billion to pay its debts, P56 billion lower than the P819.19 billion earmarked this year.
Of the P763.25 billion, P390.39 billion has been set aside for principal payments comprising P315.58 billion in domestic debt and P74.8 billion in foreign loans. The amount allocated for the settlement of principal obligations represents a 16.3 percent drop from this year’s P466.54 billion allocation.
The government has allotted P372.86 billion for payment of interest on the state’s outstanding debt. This is 6 percent higher than the P352.65 billion earmarked this year and 14.28 percent of the proposed 2015 national budget.
Out of the P372.86 billion allocation, P277.56 billion will be set aside for domestic liabilities while P95.3 billion will be for foreign debt.
Since President Aquino assumed office in 2010, the proportion of the national budget allotted for interest payments has been on a downward trend. Last year, the share fell to only 16.6 percent of the national budget.
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The country’s economic managers seek to further reduce the interest payment share to 12 percent by 2016.
As the allocation for interest payments is lowered, more funds would be available for infrastructure, social services and other vital expenditures as the country seeks to sustain economic growth.
Interest payments are part of the government’s national budget while principal obligations are paid using proceeds from fresh loans.
The government’s maturing liabilities have declined due to prepayment of some of its foreign obligations.
The Aquino administration remains committed to maintaining the budget deficit at two percent of gross domestic product, which is equivalent to P283.7 billion. This will allow the government to continue pursuing reforms to increase revenue collections.
To plug the budget deficit, the government plans to borrow a total of P700.8 billion through the issuance of Treasury bills and bonds to local investors (P605.1 billion) while about P95.7 billion will be sourced from the international market through concessional loans from development partners and the issuance of dollar bonds.
The country’s outstanding debt stood at P5.65 trillion as of the end of June, 3.7 percent or P200 billion more compared to the balance in the same period last year. Domestic debt, which accounted for 66 percent of total obligations, reached P3.73 trillion or an increase of 6.6 percent.
Debt incurred from external sources, on the other hand, amounted to P1.92 trillion last month, down by 1.6 percent from the previous year.
