Debt payments increase during the first quarter

MANILA, Philippines - Philippine debt payments rose after Manila retired existing bonds by exchanging them for newer securities maturing in five and seven years, a move seen to provide more bond market liquidity. Some P291.55 billion was spent for the first three months this year to settle local and foreign obligations, data from the Bureau of Treasury (BTr) showed. The amount is 22 percent higher than P239.38 billion alloted during the same period last year. Principal payments from January to March reached P185.23 billion, 33.15 percent more than P139.12 billion during the same quarter last year after Manila undertook a domestic bond exchange. Some P136.6 billion worth of existing bonds was retired in exchange for new five- and seven-year benchmark bonds worth P144.5 billion last January. Meanwhile, payments for principal domestic debt fell to P124.47 billion from P126.15 billion. However, payments for foreign obligations surged by almost 370 percent to P60.76 billion from P12.97 billion, during the period in review. Interest payments went up by a little more than six percent to P106.32 billion in the first quarter of the year from P100.24 billion in the same quarter last year. For this year, the Department of Finance (DOF) expects debt payments to rise by 14 percent to P698.5 billion from P612.7 billion in 2008. As a result, the Philippines’ principal and interest payments on its foreign and local obligations are expected to increase to P388.8 billion and P309.7 billion respectively. Last year, the country was able to save P23.4 billion in debt payments as the peso continued to strengthen against the US dollar as well as lower programmed interest rates. Instead of a programmed debt service of P636.1 billion last year, Manila only spent P612.7 billion to service both its foreign and domestic obligations. The Philippines continues to borrow from foreign and local sources to reduce its swelling budget deficit and settle maturing financial obligations. Manila plans to borrow more this year after its budget shortfall may further increase as the global meltdown cuts economic activity, thereby reducing the amount of taxes that the government can collect from companies. The budget shortfall is projected to reach P199.2 billion, worth 2.5 percent of gross domestic product (GDP), instead of the revised P177.2 billion or 2.2 percent of GDP this year. Last year, the budget gap widened to P68.1 billion or 0.9 percent of GDP from P12.4 billion or 0.2 percent of GDP. - GMANews.TV