Philippines’ external debt service burden declined by 7.6 percent as of end-July to $7.693 billion versus $8.329 billion in the same period last year, based on Bangko Sentral ng Pilipinas (BSP) data.
The external debt service burden decreases when there are no prepayments of loans or bond redemptions or repayments, according to BSP officials. Meanwhile, it increases when both the government and private sector prepay or repay foreign loans.
The external debt service data is an indicator of debt sustainability which refers to a country’s capacity to meet its current and future payment obligations without debt relief, extraordinary assistance or going into default.
As of end-July, the debt service principal payments decreased to $3.112 billion or 28.14 percent lower compared to same time last year of $4.331 billion. Principal external debt service are mostly fixed and revolving short-term liabilities.
As for interest payments, this increased by 14.58 percent to $4.581 billion against $3.998 billion in 2023.
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.
The country’s outstanding external debt as of end-June totaled $130.182 billion, up 10.4 percent from $117.918 billion in the same period in 2023.
Public sector external debt rose by 1.2 percent to $79.83 billion from $78.90 billion as of end-March. Public sector debt accounted for 61.3 percent of total external debt.
Private sector debt, on the other hand, slightly increased by 1.1 percent to $50.36 billion in the second quarter from $49.79 million in the first quarter. It contributed 38.7 percent to the total external debt.
The BSP said the external debt level is still manageable since the external debt ratio vis-à-vis the gross domestic product remained at prudent level at 28.9 percent as of end-June from 29 percent as of end-March.
The debt service ratio (DSR), which measures the adequacy of the country’s foreign exchange resources to meet maturing obligations, also improved to 9.5 percent from 11.1 percent same period in 2023 because of the lower debt service payments in the first six months of the year.
The country’s external debt maturity profile remained predominantly medium and long-term loans (MLT) in nature.
Based on BSP numbers, the outstanding MLT borrowings totaled $102.79 billion or about 79 percent of the external debt as of end-June. About $61.73 billion or 55 percent of MLT accounts have fixed interest rates; $49.11 billion or 43.7 percent carry variable rates; and $1.44 billion or 1.3 percent are non-interest bearing.
The outstanding short term debt, on the other hand, amounted to $27.39 billion or 21 percent of the total.
The BSP said relative to the end-March 2024 external debt data, the weighted average maturity for all MLT accounts slightly declined to 16.71 years from 16.82 years, with public sector borrowings having a longer average tenor of 20.04 years versus 7.12 years for private sector borrowings.