THE Department of Finance (DOF) said the national government’s interest payments (IP) has been declining since the return of the country’s democracy, allowing the state to bankroll other priority programs.
In a statement, the DOF said the share of interest payments, which account for the bulk of the national government’s debt service, to the state’s total expenditure was down to an average of 10.1 percent from 2016 to 2022 from an average share of 23.3 percent from 1986 to 2015.
“For 2024, the allocation for interest payments is only 11.6 percent 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,” Finance Secretary Benjamin E. Diokno said.
The allotted IP for 2024, however, is higher by nearly P60 billion than the P610.665-billion amount allocated for this year, based on the 2024 Budget of Expenditures and Sources of Financing (BESF).
Diokno reiterated that the principal amortization of debt is not included in the national government’s expense item since it is not classified as an expenditure.
Furthermore, the DOF said the principal amortization does not result in additional debt since it is “already an existing obligation.”
“The settlement of debt obligations incurred from expenses were already recorded in the past. Therefore, principal amortization only represents the fulfillment of financial responsibilities arising from previously recorded expenses,” he said.
“If any, the responsibility for the debt is just moved from the previous lender to a new lender during the refinancing process. As a result, this does not add to the debt burden,” Secretary Diokno added.
Diokno explained that principal payments are “merely” settlements of liabilities incurred in the utilization of appropriations programmed in prior years.
The national government is set to borrow P2.46 trillion next year with a borrowing mix of 75:25 in favor of domestic sources.
The Philippines’s outstanding debt at the end of 2024 is projected to reach P15.841 trillion as the Marcos Jr. administration is set to borrow more money to bankroll the national government’s record-high P5.768-trillion budget for next year. (Related story: https://businessmirror.com.ph/2023/08/03/phl-outstanding-debt-seen-rising-to-p15-84-trillion/)
The DOF remains optimistic that the improvements on the national government’s tax administration and implementation of key tax reforms would boost the state’s revenue collections and cut the country’s budget deficit.