By Lee C. Chipongian
The country’s debt service burden on loans owed to foreign creditors rose by three percent year-on-year to $5.131 billion as of end-July from $4.977 billion, based on Bangko Sentral ng Pilipinas (BSP) data.
The sum of principal payments amounted to $3.174 billion, lower by 4.31 percent compared to same time in 2018 of $3.317 billion.
Interest payments, on the other hand, continue to increase end-July to $1.958 billion from $1.660 billion or up by almost 18 percent.
Philippine total external debt as of end-June this year amounted to $81.259 billion, 12.55 percent more compared to what was reported same time last year of $72.199 billion. About $15.582 billion of the total are short-term loans.
In the meantime, public sector external debt reached $42.3 billion as of end-June this year while private sector foreign loans amounted to $39 billion.
The BSP said the external debt ratio, which is a solvency indicator, still indicates the country’s strong position to service foreign borrowings in the medium to long term.
The debt service ratio has consistently remained at single- digit levels, the BSP said. As of end-June, this was at 7.5 percent which was the same ratio reported in 2018.
The debt service ratio, which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange earnings to meet maturing obligations.
The debt service burden to current account receipts is also single digit at 7.1 percent (same with end-June 2018) while the ratio vis-à-vis the gross domestic product (GDP) stood at 2.7 percent, lower than last year’s 2.8 percent. Overall, total external debt to GDP was at 23.8 percent, higher than end-June 2018’s 22.4 percent.
Last year, the external debt service burden increased to $8.111 billion from $7.309 billion in 2017 because the National Government borrowed more loans in foreign currency to fund big-ticket infrastructure projects, many of which are included in the Duterte administration’s “Build, Build, Build” program.
Based on BSP data, external debt service burden rose to $7.188 billion in 2016 – which was the start of President Duterte’s administration – from $5.584 billion in 2015. It increased further to $7.309 billion in 2017.
BSP Governor Benjamin E. Diokno said last week that the country’s external payments position is still “comfortable” and it remains a “solid buffer for the economy against external headwinds.” The central bank’s reserves as of end-September is near $86 billion and could cover up to 7.5 months of imports and payments for services and primary income.
Diokno said the gross international reserves are “high while external debt burden is low.”
“The country’s external debt is manageable. It is a mere 23.8 percent of GDP as of end-June 2019. Manageability of external debt has improved significantly over the years, with the amount recorded at nearly 60 percent of GDP in 2005,” according to Diokno.