External debt service rises near $8-B

Published January 16, 2022, 10:10 PM

by Lee C. Chipongian

Philippines’ external debt service burden rose to $7.95 billion as of end-October 2021, higher by 27 percent compared to same period in 2020 of $6.25 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

The BSP defines debt service burden as both principal and interest payments after rescheduling.

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For the first 10 months of 2021, the country’s principal debt service burden surged by 43.36 percent to $6.05 billion from $4.22 billion same time in 2020. Principal payments are on fixed and revolving short term liabilities of banks and non-banks.

The interest payments which are on fixed medium to long term credits, however continue to decline by 6.40 percent to $1.90 billion from $2.03 billion. Interest payments are on fixed and revolving short-term liabilities of banks and non-banks but does not include prepayments on future years’ maturities of foreign loans.

As of end-September 2021, the country’s external debt increased to $105.93 billion, up by 15.16 percent year-on-year. During this period, the public and private sectors borrowed an additional $14 billion in foreign loans.

The external debt ratios remain at prudent levels in the third quarter 2021 with a GDP ratio of 27.3 percent, one of the lowest in the region. The debt service ratio (DSR) stood at 8.1 percent from 7.2 percent end-September 2020.

The DSR indicates that the country’s foreign exchange earnings is adequate to meet maturing loan payments while the external debt to GDP is a solvency indicator which still showed “sustained strong position to service foreign borrowings in the medium to long-term,” said the BSP.

The maturity profile of the country’s external debt remained predominantly medium to long-term at 88.3 percent, while short term accounts accounted for 11.7 percent.

The BSP said the weighted average maturity for all medium to long term accounts slightly increased to 17.2 years, with public sector borrowings having a longer average term of 20.8 years compared to 7.3 years for the private sector. “This means that FX (foreign exchange) requirements for debt payments are still well spread out and, thus, manageable,” said the BSP.

 
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