The Bangko Sentral ng Pilipinas (BSP) reported that the country’s debt service burden totaled $6.932 billion in the first six months of 2024, down 8.74 percent compared to $7.596 billion same period last year.
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.
As of end-June, the debt service principal payments amounted to $3.007 billion, 28.91 percent lower from same time last year of $4.23 billion. Principal external debt service are mostly fixed and revolving short-term liabilities.
Meanwhile, interest payments dropped 16.57 percent to $3.925 billion versus $3.367 billion last year.
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 billion 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 data.
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 external debt.