Maturing Covid loans, weak peso swell debt service By Reine Juvierre S. Alberto
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RINCIPAL repayment on loans drove the national government’s debt service to jump by nearly two-thirds in the first five months of the year, according to data from the Bureau of the Treasury (BTr). The government spent a total of P1.149 trillion on debt service as of end-May, 63.5 percent higher than the P702.968 billion it paid in the same period last year. More debt has matured during the fivemonth period, compared to a year ago, pushing debt servicing higher, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said. The government’s heavy Covid-era borrow-
ing to finance spending and help the economy recover has started to mature, requiring larger principal repayments, Ricafort noted. These are coupled with a weaker peso against the US dollar, which made debt servicing for matured foreign debt principal and interest payments more expensive, he added. Treasury data showed payments for amortization doubled to P728.214 billion as of endMay from P345.567 billion a year earlier. The increase was driven mainly by principal repayment on domestic debt, which surged by 269.92 percent year-on-year to P630.367 billion from P170.403 billion. In contrast, repayments on external debt fell by 44.13 percent to P97.847 billion from P175.164 billion. Meanwhile, interest payments for the five-
month period rose by 17.86 percent to P421.259 billion from P357.401 billion a year earlier. Interest payments on local debt climbed by 22.74 percent to P320.797 billion from P261.343 billion last year. Foreign interest payments stood at P100.462 billion, up by 4.58 percent year-onyear from P96.058 billion. For May alone, the government’s debt service expanded by 21.40 percent to P97.182 billion from P80.047 billion in the same month last year. Interest payments for the month increased by 20.94 percent to P84.603 billion compared to last year’s P69.954 billion. Of the amount, P66.512 billion went to domestic obligations, while P18.091 billion was allotted to service external liabilities. Amortization payments in May, likewise,
rose by 24.64 percent to P12.580 billion compared to the P10.093 billion made in the same month last year. All payments went to external amortization, which surged by 64.07 percent year-onyear from P7.667 billion. The national government’s outstanding debt reached a new record high of P18.546 trillion as of end-May, up by 9.62 percent from a year ago. About P2.005 trillion has been set aside for debt servicing this year, with P1.005 trillion programmed for principal amortization and P950 billion for interest payments. As of end-May, the government has borrowed P1.241 trillion, of which P933.665 billion was raised domestically and P308.212 billion from foreign sources.
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BSP EYES NEW ‘SHOCKS’: EL NIÑO, ₱85 WAGE HIKE www.businessmirror.com.ph
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S the energy shocks are showing signs of waning, the central bank is now redirecting its focus to the impending El Niño shock, the impact of the record-high pay hike in Metro Manila, alongside the “unusual” movements in inflation expectations, the central bank chief emphasized. On the same day the Bangko Sentral ng Pilipinas (BSP) launched its book project titled, “Risk and Resilience in the Philippine Financial System: How Much Has Changed?,” BSP Governor Eli M. Remolona Jr. signaled that the central bank is bracing for the impact of new developments in the economy. For one, Remolona said the recently approved P85 daily minimum wage hike for Metro Manila workers may have “significant” inflationary pressures.
By Samuel P. Medenilla
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However, he said the “sensitivities” of the recent wage adjustment may have to be further looked into. “Significant siya pero medyo hindi ko alam ‘yung sensitivities. Titignan pa namin. We’ll have to do the numbers. Unusual ito, eh,” the central bank chief told reporters. Even though he considers the inflationary pressures of the pay hike “significant,” the BSP governor said this record-high pay hike See “Wage hike,” A2
ECONOMISTS: JUNE INFLATION EASING NOT SUSTAINED TREND
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ESPITE inflation likely easing further in June owing to the sharp fuel price rollbacks, bank economists warned this may not yet be the start of sustained easing, especially with upside risks seen ahead such as the potential impact of Super El Niño on agricultural output and food prices. In separate commentaries, bank economists’ inflation forecasts point to a slower rise in the prices of goods and services in June, compared to the 6.8 percent headline inflation in May. Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri Jr. said headline inflation likely eased further to 6.5 percent year-on-year in June with month-on-month (MoM) print estimated at -0.1 percent as the bulk of the April-May fuel rollback continues to work through the transport component.
“However, the pace of disinflation is decelerating sharply: May’s outsized -19.6 percent MoM pump price decline narrows to an estimated -5.9 percent in June, as most of the rollback room may have already been realized,” Neri said. According to BPI’s lead economist, inflation likely eased in June as “fuel tailwind fades while food and utilities diverge.” Neri explained that Dubai crude averaged $85/bbl in June, down 16.5 percent month-onmonth after a 4.4 percent decline in May. However, he said the larger decline in global crude prices was not matched by Philippine retail pump prices, which fell just 7.7 percent month-on-month versus 19.7 percent in May. “This indicates that most of the fuel price rollback may have already been passed on to See “Inflation,” A2
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HISTORY SERVED Alexandra Eala has done it again. The 21-year-old Filipino tennis star stunned defending Wimbledon champion Iga Swiatek, 7-6 (9), 6-2, to become the first Filipino—woman or man—to reach the fourth round of a Grand Slam singles tournament. After sealing the historic victory on Centre Court, Eala dedicated the moment to the Philippines, her family, and “all the little girls with ruffled socks and chubby cheeks.” Next up: No. 13 seed Jasmine Paolini, with a Wimbledon quarterfinal berth on the line. The dream run continues. AP/MAJA SMIEJKOWSKA
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RESIDENT Ferdinand Marcos Jr. has secured US$2.5 billion or over P153.75 billion worth of investments in mining, critical minerals, and Information Technology-Business Process Management (IT-BPM) from Canadian firms from his recently concluded four-day official visit in Canada. He said the Philippines can get even more investments from Canada once the Free Trade Agreement between Manila and Ottawa is finalized within the year. The chief executive made the announcement in a media forum on Sunday (Manila time) in Vancouver, Canada after meeting with several Canadian firms, which are seeking to expand their operations in the IndoPacific region. Among the firms is Canadian mining company, B2Gold Corp., which is planning a US$14-million expansion of its gold operations through the Philippine-based Filminera Resources Corp. in Masbate. The expansion project covers a solar plant expansion of the Masbate Gold Project and exploration programs. The project paid P10 billion worth of taxes last year. Another Canada-based mining firm, OceanaGold Corp., also announced its US$1.9-billion expansion plan to extend the operations of its Didipio GoldCopper Mine until 2037. Marcos also met with representatives of Canadian telecommunications firm Telus Corporation and business process outsourcing company, NQX. “All these business engagements in the sectors of mining, critical minerals, energy, services, and IT BPM resulted in a combined US$2.5 billion in investment from Canadian partners,” he said. “Thus, it is already timely that we presently are negotiating a free trade agreement with Canada, which we hope will further strengthen our economic cooperation once it enters into force,” he added. This was on top of the 2 million Canadian dollars or over P86.62million investments, which Canada announced in May in the country’s Luzon Economic Corridor (LEC), and which Canadian Prime Minister Mark Carney reiterated during his bilateral talk with Marcos last week. See “$2.5-B,” A2
PESO EXCHANGE RATES n US 61.5900 n JAPAN 0.3824 n UK 82.2288 n HK 7.8530 n CHINA 9.0800 n SINGAPORE 47.6445 n AUSTRALIA 42.6203 n EU 70.4282 n KOREA 0.0400 n SAUDI ARABIA 16.4039 Source: BSP (July 3, 2026)