Debt service or payment on the country’s external debt continued to decrease as of end-June to $3.17 billion, down by 42.4 percent from same period last year of $5.51 billion as government does not prepay foreign debt.

Bangko Sentral ng Pilipinas (BSP) data showed that since the government has not been prepaying foreign debt, principal external debt service dropped by 58.7 percent to $1.81 billion from $4.39 billion end-June 2021.

Interest payments, in the meantime, increased to $1.36 billion versus $1.12 billion same period last year, or up by 21.4 percent.

Principal external debt service are mostly fixed and revolving short-term liabilities. When the government or private sector prepays, these are on loans and bond redemptions or repayments. The debt service burden, which represents both principal and interest payments after rescheduling, are fixed medium to long term credits which includes International Monetary Fund credits, other loans and facilities.

The BSP has recently adopted a more accurate debt monitoring system and management of external debt data to improve its analysis and early warning signals.

The BSP is implementing an updated Debt Management and Financial Analysis System (DMFAS) 6 as part of mandates on external debt management. DMFAS,

a database software currently adopted by 105 finance ministries, central banks, and other debt management offices in 69 countries, will be used to record, monitor, report and analyse available debt data.

Last week, the BSP released the latest external debt data of $107.69 billion as of end-June, up by 6.4 percent from $101.19 billion same time last year.

The current debt stock is 26.8 percent of gross domestic product (GDP). This was a lower GDP ratio compared to end-March’s 27.5 percent. As far as the BSP is concerned, the external debt to GDP ratio still indicates Philippines’ “sustained strong position” to service foreign borrowings in the medium to long-term.

This is despite that at $107.69 billion, the country’s external debt stock is higher than the foreign exchange buffer of $99 billion as of end-August.

Meanwhile, the debt service ratio or DSR improved to five percent from 9.5 percent same period last year on account of lower repayments and higher receipts. The DSR, which relates principal and interest payments or debt service burden to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange earnings to meet maturing obligations.

As of end-June, public sector external debt amounted to $65.7 billion, of which the government accounted for 87.8 percent of the total. The private sector debt stood at $42 billion.