By Justine Irish D. Tabile, Senior Reporter
THE National Government’s (NG) debt service bill plunged by 88.55% in August as principal repayments fell sharply, the Bureau of the Treasury (BTr) said.
The latest Treasury data showed debt service declined to P76.12 billion in August from P664.72 billion in the same month a year ago.
Month on month, debt service dropped by 45.63% from P139.99 billion in July.
Debt service covers principal and interest payments on the government’s domestic and foreign borrowings.
Interest payments accounted for the bulk or 86.21% of the total debt service bill in August, while the rest went to principal repayments.
The government’s interest payments rose by 3.98% to P65.62 billion in August from P63.11 billion in the same month a year earlier.
Interest payments for domestic debt stood at P56.12 billion in August, up by 21.02% from P46.38 billion in the same month in 2025.
Of this total, P29.19 billion went to fixed-rate Treasury bonds, P21.09 billion to retail Treasury bonds, and P5.84 billion to Treasury bills.
Meanwhile, interest payments for foreign borrowings dropped by 43.25% to P9.49 billion in August from P16.73 billion a year earlier.
On the other hand, the NG’s principal repayments plunged by 98.25% to P10.5 billion in August from P601.62 billion a year ago.
The entire amount went to amortization of foreign obligations, with no principal repayments made on domestic debt during the month.
Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the sharp decline in August debt service should be interpreted cautiously, as it may largely reflect the timing of repayments rather than an easing of the government’s debt burden.
“Debt service data are typically influenced by the timing of principal maturities, interest payments, and liability management operations,” Mr. Asuncion said in a Viber message.
“As such, the lower outturn does not necessarily signal a significant easing in the government’s debt burden, although it may have provided some temporary relief to cash management requirements during the month,” he added.
EIGHT-MONTH BILL
For the first eight months, the government’s debt service bill slid by 6.37% to P1.44 trillion from P1.54 trillion in the same period last year.
Principal repayments accounted for more than half or 52.42% of the total debt service bill during the January-to-August period.
Amortization payments declined by 20.95% to P756.32 billion as of August from P956.74 billion a year ago.
Broken down, principal payments for domestic debt fell by 17.89% to P631.04 billion, while payments for external borrowings slumped by 33.44% to P125.28 billion.
Despite the lower overall debt service bill, interest payments rose by 17.52% to P686.48 billion in the eight months ending August from P584.15 billion in the same period a year ago.
Interest payments on domestic debt jumped by 20.17% year on year to P515.69 billion in the first eight months from P429.12 billion a year ago.
This consisted of P359.85 billion for fixed-rate Treasury bonds, P112.15 billion for retail Treasury bonds, P35.9 billion for Treasury bills, and P7.8 billion in interest payments for other domestic borrowings.
Interest payments on foreign obligations increased by 10.17% year on year to P170.79 billion in the January-to-August period from P155.03 billion a year ago.
Mr. Asuncion said the broader fiscal position remains dependent on the government’s fiscal consolidation efforts, particularly amid still sizable financing requirements.
“Looking ahead, debt servicing costs are likely to remain substantial given the large stock of outstanding debt and ongoing borrowing needs,” he said.
“While the Bangko Sentral ng Pilipinas’ easing cycle could help moderate future domestic financing costs, risks remain,” he added.
Mr. Asuncion also warned that further peso depreciation could raise the peso value of foreign currency debt obligations, while sustained borrowing could continue to add to interest expenditures over time.
The peso strengthened by 9.9 centavos on Friday to close at P62.801 per dollar from Thursday’s record-low finish of P62.9.
“Ultimately, durable improvements in debt sustainability will depend not only on prudent debt management but also on stronger revenue generation, sustained economic growth, and continued progress in narrowing the fiscal deficit,” he added.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the decline in debt service reflects the timing of debt payments and active debt management rather than a fundamental reduction in the government’s debt burden.
“The longer-term story will still depend on interest rates, economic growth, exchange rate stability, and fiscal discipline,” he added.