Gov’t interest expenses declined in October

Interest burden, as a share of government revenues, eased in October, although it stayed above the 15-percent mark that a debt watcher said must not be breached on a sustained basis to avoid any downward pressures on the country’s creditworthiness.

Latest data from the Bureau of the Treasury showed interest payments ate up 15.3 percent of state revenues in October, down from 28.0 percent in September.

So far this year, interest costs, as a share of revenues, stood at 16.21 percent, higher than 14.7 percent a year ago.

Analysts have said the Marcos administration could face more expensive borrowings amid rising interest rates following the aggressive tightening actions of the Bangko Sentral ng Pilipinas (BSP) to fight resurgent inflation.

That could create a problem for a government that has to plug a projected budget deficit of P1.5 trillion this year, which is equivalent to 6.1 percent of gross domestic product. But more importantly, rising interest rates risk diverting government funds from more productive spending to settling borrowing costs.

Last week, S&P Global Ratings affirmed the country’s triple-B plus investment grade credit rating while keeping a “stable” outlook, meaning changes in the rating are unlikely in the next 18 to 24 months.

But S&P cautioned the government from letting debts, as a share of the economy, exceed the 60 percent threshold deemed manageable for emerging economies like the Philippines.

The debt watcher also said interest payments exceeding 15 percent of revenues on a sustained basis would be an indication of downward pressure on the country’s creditworthiness.

S&P said it may ultimately downgrade the Philippines’ credit rating if “economic recovery falters, leading to a significant erosion of the country’s long-term trend growth or an associated deterioration of the government’s fiscal and debt positions.”

However, an upgrade may happen if the economy “recovers much faster than we expect, and the government achieves more rapid fiscal consolidation.” INQ