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Manila Bulletin devider Business devider Foreign debt service drops 17% to $3.98 billion in June

Foreign debt service drops 17% to $3.98 billion in June

Published Sep 23, 2020 05:00 am

The country’s external debt service burden was down by 17 percent end-June to $3.983 billion from $4.80 billion same time last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Debt service burden is principal and interest payments on both the public and private sector debts after rescheduling. As of end-June, principal payments dropped to $2.815 billion or by 10.97 percent from $3.162 billion while interest payments fell by 28.69 percent to $1.168 billion from $1.638 billion.

Based on BSP numbers, debt service burden was lower in the second quarter at $1.20 billion versus $2.783 billion in the first three months of 2020.

Principal payments in the second quarter of $786 million was also significantly less than in the first quarter of $2.029 billion. Interests paid amounted to $413 million in the second quarter compared to $754 million in the previous quarter.

External debt service burden represents principal and interest payments but does not include prepayments on future loan maturities. 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.

As of end-June, the country’s outstanding external debt was up by 7.6 percent year-on-year to $87.453 billion, mainly from government foreign borrowings to fund COVID-19 pandemic response programs.

The debt service ratio which is an indicator of a country’s sufficient stock of foreign exchange (FX), is still adequate. From January to June this year, the ratio slightly increased to 7.8 percent from 7.7 percent in 2019, said the BSP.

The total outstanding debt vis-à-vis the GDP also increased to 23.7 percent from 21.4 percent end-March. The BSP said this ratio, despite the increase, still indicates “sustained strong position” to pay for medium to long-term loans.

Public sector external debt was higher at $51 billion end-June from $45.1 billion end-March. Of this amount, $44.4 billion were National Government borrowings while state-owned corporations including the BSP borrowed the remaining $6.6 billion. Private sector debt, in the meantime, totaled $36.5 billion end-June from $36.3 billion in the previous quarter as few companies borrowed off-shore during the lockdown period.

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Debt Foreign debt Bangko Sentral ng Pilipinas (BSP)
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