Philippines’ external debt service burden rose by 125 percent to $8.889 billion as of end-August from same period last year of $3.949 billion, based on Bangko Sentral ng Pilipinas (BSP) data.
When both the government and private sector make a lot of foreign loan prepayments or repayments, the debt service burden increases. It declines when there are no prepayments of loans and bond redemptions or repayments.
For the period, external debt service principal payments totaled $4.465 billion, up by 92.4 percent from $2.321 billion in end-August 2022.
Interest payments, meanwhile, increased to $4.425 billion from $1.627 billion or up by 172 percent year-on-year.
Principal external debt service are mostly fixed medium to long term credits while interest payments are on fixed and revolving short-term credits of banks and non-banks.
Debt service burden represents both principal and interest payments after rescheduling. The principal and interest payments on fixed medium to long term credits include International Monetary Fund credits, other loans and facilities.
As of end-June this year, the total outstanding external debt grew 9.5 percent year-on-year to $117.918 billion from $107.692 billion same time in 2022.
On a quarterly basis, the external debt slightly dipped 0.8 percent or by $894 million from its end-March level of $118.8 billion. The BSP attributed the lower debt level in the second quarter from the impact of the US dollar appreciation against other currencies in reaction to continued US Federal Reserve policy rate tightening.
The $117.918 billion external debt is equivalent to 28.5 percent of the country’s gross domestic product (GDP), higher from same time last year of 26.8 percent.
As of end-June, public sector external debt dropped to $74.5 billion in the second quarter of 2023 from the previous quarter’s $75.2 billion. Private sector debt also declined to $43.4 billion from $43.6 billion end-March.
The BSP reported that the debt service ratio (DSR) increased to 11 percent from 4.6 percent same period last year due to higher repayments in the second quarter of 2023.
The DSR relates principal and interest payments or debt service burden to exports of goods and receipts from services and primary income.
The BSP said the DSR level still indicate that the country has adequate foreign exchange resources to meet maturing obligations. As of end-August this year, the central bank’s US dollar stock total almost $100 billion.
As of end-June, the country’s major creditors are still Japan with $13.3 billion of external debt, followed by the US with $4.1 billion and the United Kingdom with $3.7 billion.
Meanwhile, loans from official sources or multilateral loans worth $32 billion and $12.6 billion from bilateral creditors accounted for 37.9 percent of total debt stock.
Other borrowings are in the form of bonds and notes worth $40.7 billion which was 34.5 percent of the total, and obligations to foreign banks and other financial institutions worth $25 billion or 21.2 percent of the total. The rest at $7.5 billion or 6.4 percent of the total were owed to other creditors, mainly suppliers and exporters.