By Lee C. Chipongian
Loan repayments pushed the country’s external debt service burden down to $3.628 billion as of end-June this year, or 5.47 percent lower from same time in 2017 of $3.838 billion.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that for the period, the principal portion fell by 10.18 percent to $2.338 billion from $2.603 billion. Interest payments, on the other hand, went up by 4.37 percent to $1.290 billion from $1.236 billion same time last year. External debt service burden, part of the the outstanding external debt, represents principal and interest payments but does not include prepayments on future loan maturities.
The BSP reported earlier this month that the Philippines’ total outstanding external debt amounted to $72.2 billion as of end-June, it decreased by 0.4 percent compared to the same period last year of $72.5 billion on loan repayments and foreign exchange (FX) adjustments.
BSP Governor Nestor A. Espenilla Jr. said earlier that external debt continued to be manageable because corporate borrowers are deleveraging from foreign borrowings to lessen their FX risk. The US dollar accounted for 61.5 percent of the country’s debt stock. The greenback has been pummeling the peso to a 13-year low of P54 amid global trade conflict and rising US interest rates.
For the six-month period, net principal repayments totaled $2.4 billion, one of the factors that brought total foreign debt to decline.
At the end of the second quarter, the country’s total public sector external debt was down to $38 billion from $39.2 billion as of end-March with net principal repayments amounting to $245 million. Government borrowings account for 83.5 percent of this loan.
As for private sector external debt, this increased to $34.2 billion as of end-June from $34 billion.
Espenilla said external debt indicators improved during the April to June period. During this time, the BSP has FX reserves of $77.5 billion.
The debt service ratio (DSR), which relates principal and interest payments or debt service burden to exports of goods and receipts from services and primary income, stood at 6.1 percent as of end-June. This is better than 7.8 percent in end-March and 6.7 percent end-June 2017, said the BSP, which means FX earnings continue to be adequate to meet maturing loans.
“The DSR has consistently remained at single digit levels, and well below the international benchmark range of 20 to 25 percent,” said the BSP. It added that the external debt ratio which is a solvency indicator, is also improving after falling to 18.7 percent end-June from 19.1 percent in the first quarter this year, and 19.5 percent in end-June 2017.