Debt service burden down 16.6%

Published February 2, 2021, 6:00 AM

by Lee C. Chipongian

The country’s external debt service burden fell to $6.09 billion as of end-October 2020 or 16.6 percent lower from same time in 2019 of $7.30 billion, data from the Bangko Sentral ng Pilipinas (BSP) show.

Principal payments dropped 9.95 percent to $4.15 billion from $4.61 billion while interest payments declined by 27.97 percent to $1.94 billion from $2.69 billion of the previous year.

Photographer: Paul Yeung/Bloomberg file

The debt service ratio and the external debt ratio measures the adequacy of foreign exchange earnings to pay for maturing foreign loans. The debt service ratio relates principal and interest payments or the debt service burden to exports of goods and receipts from services and primary income.

The BSP said these ratios continue to be on the healthy side and are far from breaking the BSP Early Warning System or EWS on debt sustainability. For one, the central bank is confident that the debt service ratio will continue to be well below the 17.46 percent danger threshold based on the EWS.

The BSP’s latest external debt data which was as of end-September 2020 indicated a higher external debt position at $92 billion, up 11.25 percent from same period in 2019 of $82.67 billion. There were more foreign loans because of the government’s requirement to fund anti-pandemic programs. Of the $92 billion, the public sector external debt stood at $54.4 billion.

Last week, the BSP announced that it has approved a total $17.7 billion public sector foreign borrowings in 2020, up 82.5 percent from $9.7 billion in 2019. Most of these loans are for COVID-19 response.

In the last quarter of 2020, there were $4.04 billion foreign borrowings made by the National Government and these include the general financing requirements of the government of $2.8 billion. 

It also includes the $700 million program/project loans in response to the COVID-19 pandemic, a $500 million disaster risk financing, an $88.3 million customs modernization and water transmission improvement project worth $126 million.