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Manila Bulletin devider Business devider Banking & Finance devider Philippine debt service burden drops 3.8%

Philippine debt service burden drops 3.8%

Published Nov 17, 2024 10:06 pm

The country’s external debt service burden dipped 3.8 percent to $8.68 billion as of end-August compared to $9.023 billion in the same period last year, based on Bangko Sentral ng Pilipinas (BSP) data.

During the period, external debt service principal payments totaled $3.461 billion, lower by 23.27 percent from $4.511 billion same time last year.

Interest payments, meanwhile, increased to $5.218 billion from $4.512 billion in 2023 or up by 15.64 percent.

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.

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. 

BSP officials 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. 

The country’s outstanding external debt as of end-June 2024 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 nillion 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, 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.

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Philippine debt Bangko Sentral ng Pilipinas (BSP)
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