The country’s servicing of external debt increased by 19.84 percent to $14.475 billion as of the end of October 2024 compared to $12.078 billion same period in 2023 due to prepayments or repayments of public and private sector’s foreign obligations.
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.
As of end-October last year, debt service principal payments went up by 23.57 percent to $7.846 billion versus $6.349 billion same time in 2023, based on Bangko Sentral ng Pilipinas (BSP) data. Principal external debt service are mostly fixed and revolving short-term liabilities.
Interest payments also increased by 15.68 percent to $6.629 billion from $5.73 billion.
The 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 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.
Philippines’ outstanding external debt as of end-September 2024 rose to $139.643 billion, up by 17.5 percent from $118.833 billion same period in 2023. The external debt increased because of more foreign borrowings by both the government and private sector, and non-residents’ investments in onshore debt securities.
The public sector external debt increased to $86.88 billion during the period, about 62 percent of the total outstanding external debt. Bulk or $80.13 billion of public sector obligations are government loans, while the remaining $6.76 billion are borrowings of government-owned and controlled corporations, government financial institutions and the BSP.
Private sector debt, in the meantime, also increased to $52.76 billion as of end-September last year.
The BSP has noted that 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 11.6 percent as of end-September from 10.4 percent same time in 2023.
At current levels, the DSR which measures the country’s capacity to pay for maturing loans, and the gross international reserves are considered adequate cover for the country’s short-term debt. The Philippines has a US dollar stock of $106.8 billion as of end-December 2024.