The country’s external debt service burden went up by 24.64 percent to $2.686 billion as of end-February from same time last year of $2.155 billion, according to Bangko Sentral ng Pilipinas (BSP) data.
Principal payments increased by 37.46 percent to $2.227 billion from $1.620 billion. Interest payments dropped by 14.20 percent to $459 million from $535 million in 2020.
The debt service ratio (DSR) has improved to 6.3 percent in 2020 from 6.7 percent in 2019 because of lower payments. The DSR and the external debt ratio measures the adequacy of foreign exchange earnings to pay for maturing foreign loans. The DSR relates principal and interest payments or the debt service burden to exports of goods and receipts from services and primary income.
The BSP noted that current ratios continue to be on the healthy side and are far from breaking the BSP Early Warning System or EWS on debt sustainability.
In 2020, the country’s outstanding external debt went up by 17.8 percent year-on-year to $98.488 billion, or 27.2 percent of GDP. The last time the external debt to GDP was at this level was in 2013. It has been under 23 percent to GDP ratio since 2017.
The government borrowed more foreign loans in 2020 to fund COVID-19 response. The external debt to GDP increased to 27.2 percent from 22.2 percent in 2019. As solvency indicator, this level is still considered stable.
As of end-March this year the BSP said it has approved $2.84 billion worth of public sector foreign borrowings. This was up by 19.36 percent from same time last year of $2.38 billion.
The $2.84 billion BSP-approved project loans include the government’s $900 million COVID-19 pandemic response programs for vaccine procurement and distribution, and also its $798 million refinancing of existing obligations and general financing requirements.
To make sure foreign debt level continue to be manageable, the BSP is mandated to review and approve all public sector or government foreign borrowings under Section 20, Article VII of the 1987 Philippine Constitution.
So far, the government has borrowed $18.4 billion from external sources, of which $16.26 billion is for budgetary financing and $2.14 billion for project financing.
Last year, external debt service burden amounted to $7.071 billion, down from $8.702 billion in 2019.