State exceeds Q1 debt service program

REPORT FROM BUSINESSWORLD The government exceeded its programmed debt service by 1.6% in the first quarter, as it paid more foreign debts ahead of schedule. Data from the Finance department showed the government paid P175.58 billion in the first quarter against P172.815-billion payments programmed for that period. The January-March debt payments, however, were 37.15% less than the P279.364-billion payments made in the same period last year. Actual foreign debt payments of P65.45 billion for the quarter this year were P6.181 billion more than the targeted P59.269 billion under the budget program for those three months. On the other hand, the actual local debt payments of P110.13 billion were P3.414 billion short of the P113.544-billion target. In the first quarter, the government paid interest of P89.149 billion, about P5.106 billion less than the P94.255 billion programmed for the same period. Finance Undersecretary Gil S. Beltran told reporters the strong peso led to lower interest payments. For instance, the government assumed a P49:$1 exchange rate for the first quarter debt service target, when the actual average was P48.63. The peso is now traded at P47/$1 levels. In an earlier interview, Mr. Beltran said the interest payments for 2007 would total P303.3 billion, lower than last year’s actual interest payments of P310.1 billion. "The reduction of interest payments is also due to the declining base," Mr. Beltran said, noting that outstanding debt as of end-2006 amounted to P3.851 trillion, down from the P3.888-trillion debt at the end of 2005. About P195 billion of the interest payments scheduled this year will be for local debt while P108.3 will be for foreign debts. The reduced payments mean more funds from the government’s budget can be used for development projects, Mr. Beltran said. Lower-than-assumed Treasury bill rates also reduced interest payments. Finance department data showed the government had assumed a 4.5% rate for bench- mark 91-day Treasury bill for January-March, when the actual average rate in the first quarter was only 3.14%. — PJLL/BusinessWorld