The country’s external debt service burden as of April totaled $4.64 billion, 19.79 percent lower compared to the same time last year of $5.785 billion, with fewer prepayments from the public and private sectors.
The debt service burden, which represents both principal and interest payments after rescheduling, is based on fixed medium—to long-term credits, including International Monetary Fund credits, other loans, and facilities.
Based on the latest Bangko Sentral ng Pilipinas (BSP) data, debt service principal payments declined by 41.46 percent to $2.115 billion versus $3.613 billion during the same period in 2023. Principal external debt service is mostly fixed and revolving short-term liabilities.
Interest payments, meanwhile, increased by 16.25 percent to $2.525 billion from $2.172 billion at the same time in 2023.
External debt service data is an indicator of debt sustainability. When the government or private sector prepays, these are on loans and bond redemptions or repayments.
External debt sustainability 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 the government and private sector make 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.
As of the end of March, the country’s total outstanding external debt amounted to $128.692 billion, 8.3 percent higher than last year’s $118.812 billion. More government and private sector borrowings, mostly bank loans for liquidity purposes, pushed external debt higher.
On a year-on-year basis, debt stock rose by $9.880 billion due mainly to total net availments worth $8.9 billion, of which $5.4 billion are borrowings by private sector entities, primarily banks. Other factors that raised external debt are the net acquisition of Philippine debt securities by non-residents of $1.5 billion and prior years’ adjustments of $1 billion.
As of end-March, public sector external debt increased by 1.4 percent, or $1.1 billion, to $78.9 billion from the previous quarter’s $77.8 billion. Its share of the total decreased to 61.3 percent from 62.1 percent a quarter ago.
About 91.6 percent, or $72.3 billion of public sector obligations are National Government borrowings, while the remaining 8.4 percent, or $6.6 billion, are borrowings by government-owned and controlled corporations, government financial institutions, and the BSP.
Private sector debt, on the other hand, increased by 4.7 percent or $2.2 billion to $49.8 billion as of end-March. Its share to total debt stood at 38.7 percent, up from 37.9 percent as of end-December 2023.
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, improved to 8.9 percent from 13 percent for the same period last year due to lower scheduled debt service payments in the first quarter of 2024, according to the BSP.
The DSR and the gross international reserves cover for short term debt are measures of the adequacy of the country’s foreign exchange resources to meet maturing obligations.
Despite the increase in the debt stock, the external debt ratio or EDT expressed as a percentage of gross domestic product, remains at prudent levels at 29 percent from 28.7 percent in the last quarter of 2023.