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Manila Bulletin devider Business devider Banking & Finance devider Philippines' debt service burden up at $14.7 B in 2023

Philippines' debt service burden up at $14.7 B in 2023

Published Mar 18, 2024 06:43 am

The country’s external debt service burden went up by 73.9 percent to $14.752 billion in 2023 versus $8.483 billion in 2022 as both the private and public sector made more prepayments last year.

Based on the latest Bangko Sentral ng Pilipinas (BSP) data, external debt service principal payments amounted to $7.713 billion last year, up by 67.2 percent from $4.613 billion in 2022. Principal external debt service are mostly fixed medium to long term credits.

Meanwhile, interest payments reached $7.039 billion which was higher by 81.8 percent from $3.871 billion of the previous year. 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.

The external debt service burden rises when both the government and private sector prepay or repay foreign loans. It declines when there are no prepayments of loans or bond redemptions, or repayments.

Philippines’ outstanding external debt stood at $125.394 billion as of end-December 2023, up by 12.7 percent from end-2022 level of $111.268 billion.

The BSP in a statement last week said the external debt increased due to the following: net availments of $9.2 billion of which bulk were net borrowings by the National Government (NG) worth $7.9 billion; the change in the scope of the external debt to include non-residents’ holdings of Philippine debt securities issued onshore reported in the first quarter of 2023 or $4.4 billion; and prior years’ adjustments of $1.2 billion.

The BSP said that despite the increase in the debt stock, the external debt ratio vis-à-vis the gross domestic product remained at prudent levels at 28.7 percent versus 27.5 percent in end-2022.

The debt service ratio (DSR), which relates principal and interest payments or the debt service burden to exports of goods and receipts from services and primary income, increased to 10.2 percent in 2023 from 6.3 percent in 2022 because of the higher principal and interest payments due to rising interest rates in 2023.

The DSR, along with the gross international reserves’ cover for short term debt, measures the country’s adequacy of foreign exchange resources to meet maturing obligations, said the BSP.

Last year, public sector external debt increased by 5.6 percent year-on-year to $77.8 billion which was about 62.1 percent of total external debt. About $71 billion or 91.2 percent of public sector obligations were NG borrowings.

As for private sector debt, this increased by 5.4 percent to $47.6 billion last year, about 37.9 percent of the total external debt.

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