The country’s external debt service burden decreased by 11.11 percent to $4.934 billion as of end-August from $5.551 billion same time last year, according to the Bangko Sentral ng Pilipinas (BSP).

 Debt service burden is payment made to both principal and interest on both the public and private sector debts after rescheduling. It does not include prepayments.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that principal payments dropped 1.30 percent year-on-year to $3.318 billion from $3.362 billion. Interest payments also declined by 26.17 percent to $1.616 billion from $2.189 billion same time in 2019.

The principal and interest payments are on fixed medium to long term credits, loans and new money facilities. Interest payments also include fixed and revolving short-term liabilities of both banks and non-banks.

The BSP said external debt numbers and ratios are still at comfortable levels despite more government borrowings because of the pandemic. As of end-June, the country’s total outstanding external debt went up by 7.6 percent year-on-year to $87.453 billion. The debt service ratio which indicates a country’s

sufficient stock of foreign exchange, improved to 7.8 percent from 7.7 percent in 2019.

As part of its mandate, the BSP has mechanisms to ensure debt sustainability. All external borrowings have to go through the central bank’s Monetary Board for assessment and approval.

The BSP review includes how a new foreign loan will affect liquidity and overall external accounts, as well as its impact on economic, monetary and financial system.

 BSP Governor Benjamin E. Diokno continued to assure the public that the impact of new foreign borrowings on key metrics is manageable and sustainable.

“Even with the huge financing requirements to mitigate the effects of the pandemic, our economy’s debt profile remains manageable,” said Diokno last Friday. “Also, the country’s total external debt increased only to 24 percent of GDP as of end-June, a large part of which is in the form of medium-, and long-term loans.”

 Overall including domestic debt, the Philippines’ debt-to-GDP ratio increased to 48 percent as of end-June. Diokno said this level is way below the ratio of 72 percent in 2004 during the fiscal crisis.

 Total external outstanding debt vis-à-vis the GDP increased to 23.7 percent as of end-June from a 21.4 percent ratio as of end-March because the GDP has declined by 16.5 percent while external debt went up. Still, the BSP said this ratio indicates the country’s “sustained strong position to service foreign borrowings in the medium to long-term” because it is one of the lowest debt to GDP ratio in the region, and among ASEAN countries.