External debt service drops by 10% in Q1

The country’s external debt service burden is lower at the end of the first quarter, down 9.58 percent to $2.246 billion versus the previous year’s $2.484 billion.

Data from the Bangko Sentral ng Pilipinas (BSP) show that principal debt servicing fell 12.75 percent to $1.539 billion from $1.764 billion. Interest payments also decreased 1.80 percent year-on-year to $707 million from $720 million.

The debt service ratio continues to show the adequacy of public and private sector’s foreign exchange earnings, according to the central bank.

The Philippines’ external debt at the end of March stood at $73.2 billion overall, lower by 0.8 percent year-onyear or $609 million, and this is mainly due to a $3.4-billion net repayments from the private sector’s short term non-trade accounts.

The lower external debt is also due to: previous periods’ adjustments of $1.5 billion from the late reporting; upward foreign exchange revaluation adjustments amounting to $713 million; and transfer of Philippine debt papers from residents to non-residents totalling $618 million.

As of end-March, the public sector external debt totaled $39.2 billion while private sector debt was down to $34 billion during the period.

BSP Governor Nestor A. Espenilla Jr. said “key external debt indicators continued to improve in the first quarter of 2018.”

The debt service ratio which relates principal and interest payments to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange earnings to meet maturing obligations.

During the quarter, the BSP said this ratio improved to 7.6 percent from the 9.1 percent same time in 2017. The debt service ratio has consistently remained at single digit level, and well below the international benchmark range of 20 percent to 25 percent, it added.

“The external debt ratio (a solvency indicator), or total outstanding debt expressed as a percentage of annual aggregate output, continued to show an improving trend, declining to 19.1 percent from 19.4 percent in the fourth quarter of 2017 and 20 percent a year ago,” the BSP said. “The same improving trend was observed using GDP as denominator, with the Philippine economy growing by 6.8 percent in the first quarter of 2018.”