The Philippines’ external debt service burden rose by 240.7 percent to $4.313 billion as of end-March from $1.266 billion same period in 2022, based on Bangko Sentral ng Pilipinas (BSP) data.
Principal payments increased by 393.6 percent to $2.764 billion versus $560 million last year. Meanwhile, interest payments on these loans went up by 119.4 percent to $1.549 billion from $706 million same period in 2022.
BSP officials have said that when both the government and private sector makes a lot of prepayments or repayments, the debt service burden increases. It declines when there are no prepayments of loans and bond redemptions or repayments.
Principal external debt service are mostly fixed medium to long term credits. Interest payments are on fixed and revolving short-term credits of banks and non-banks.
As explained by the BSP, debt service burden represents principal and interest payments after rescheduling and includes International Monetary Fund credits, loans covered by the Paris Club and commercial banks rescheduling, and New Money Facilities. However, it does not include prepayments of future years' maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and non-banks.
Earlier this month, the BSP reported a higher outstanding external debt of $118.812 billion as of end-March this year, or up by 8.25 percent compared to same period last year of $109.753 billion.
The BSP said borrowings by the public sector for the National Government’s (NG) general financing requirements, funding of pandemic recovery measures, and other infrastructure programs, among others, contributed to the growth in the debt stock.
The current debt stock is equivalent to 29 percent of gross domestic product (GDP), higher than 27.5 percent from end-December 2022 and end-March last year.
The BSP said a “statistical adjustment” led to a higher external debt to GDP ratio of 27.5 percent in 2022.
As of end-March, public sector external debt stood at $75.2 billion, up from end-2022’s $67.4 billion. About $68.1 billion or 90.5 percent were NG borrowings, while $7.1 billion were loans by government-owned and controlled corporations, government financial institutions and the BSP.
Private sector debt was at $43.6 billion compared to $43.9 billion end-2022.
Meanwhile, the debt service ratio (DSR) increased to 12.9 percent from four percent same period last year because of repayments in the first quarter.
The DSR, which relates principal and interest payments or the 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 (FX) earnings to meet maturing obligations.
Philippines’ debt stock is predominantly medium- and long-term (MLT) in nature at 85.4 percent, or with original maturities longer than one year. About 14.6 percent are short-term accounts or up to one year maturities. This means that FX requirements for debt payments are still well spread out and, thus, manageable, said the BSP.
The weighted average maturity for all MLT accounts is 17.3 years with public sector borrowings having a longer average term of 20.2 years compared to 7.2 years for the private sector.