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Manila Bulletin devider Business devider External debt service falls 12.4%

External debt service falls 12.4%

Published Feb 19, 2023 08:10 pm

Philippines’ external debt service burden as of end-November 2022 dropped to $7.37 billion or down by 12.4 percent from same period in 2021 of $8.38 billion because of fewer prepayments of loans.

Based on Bangko Sentral ng Pilipinas (BSP) data, principal payments declined by 38.1 percent to $3.94 billion during the period versus $6.37 billion previously. Principal external debt service are mostly fixed and revolving short-term liabilities.

Meanwhile, interest payments rose 69.3 percent to $3.39 billion from $2 billion same time in 2021.

US dollar/Manila Bulletin article

As previously explained by BSP Deputy Govenor Francisco G. Dakila Jr., debt service burden decreases when there are no prepayments of loans and bond redemptions/repayments from the public and private sectors during a period or a month.

Debt service burden, which represents both principal and interest payments after rescheduling, is fixed medium to long term credits which includes International Monetary Fund credits, other loans and facilities.

As of end-September 2022, the country’s outstanding external debt totalled $107.91 billion, up by 1.87 percent from same period in 2021 of $105.93 billion.

Public sector debt totalled $64.8 billion and about 87.7 percent or $56.8 billion of public sector obligations were National Government borrowings. Private sector debt amounted to $43.1 billion.

The external debt level is currently higher than the BSP-managed gross international reserves of $96.15 billion as of end 2022.

The country’s external debt as a ratio against gross domestic product (GDP) is equivalent to 26.8 percent, lower than 27.3 percent same time in 2021.

The BSP said in December, when they released the latest external debt data, that the “low” debt level to GDP ratio which is a solvency indicator, still “indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term.”

As of end-September 2022, the debt service ratio (DSR) stood at 5.4 percent compared to 8.2 percent same period last year due to lower repayments accompanied by higher receipts, said the central bank.

The DSR, which is the debt service burden, measures the adequacy of the country’s foreign exchange earnings and its capacity to pay its foreign currency loans.

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