External debt payment falls 8% as of July

The country’s external debt service burden dropped to $4.062 billion as of end-July, 8.12 percent lower than same period last year of $4.421 billion, according to the Bangko Sentral ng Pilipinas (BSP).

Principal payments also fell to $2.461 billion from $2.904 billion endJuly in 2017, or down by 15.25 percent. Interests paid, however, rose 5.54 percent to $1.601 billion from $1.517 billion last year.

External debt service burden, which is part of the outstanding external debt, represents principal and interest payments but does not include prepayments on future loan maturities.

The ratio of debt service burden to the country’s export shipments as of end-July was at 13.7 percent, lower than last year’s 14.7 percent. The ratio to exports of goods and receipts from services and primary income also dropped to 5.8 percent from 6.5 percent in 2017, while debt service burden ratio to current account receipts fell to 5.5 percent from 6.2 percent.

Export shipments for the first seven months of the year totaled $29.563 billion, down from $30.141 billion same time in 2017. Exports of goods and receipts from services and primary income – which includes cash remittances from overseas Filipinos – increased to $70.096 billion end-July from $67.597 billion while current account

receipts rose to $73.812 billion versus 2017’s $71.353 billion.

Remittances and receipts from business process outsourcing sector continued to support the country’s external position, said the BSP.

As of end-June, Philippine outstanding foreign debt amounted to $72.2 billion, about 0.4 percent lower than same time last year of $72.5 billion because of loan repayments and foreign exchange (FX) adjustments.

The debt service ratio, which relates principal and interest payments or debt service burden to exports of goods and receipts from services and primary income, was reported at 6.1 percent during the period, which was an improvement from 7.8 percent as of end-March and indicated that FX earnings continue to be adequate to meet maturing loans, according to the central bank.

“External debt remained manageable, with a debt profile composed largely of medium- to long-term maturities,” it said.

The country’s net principal repayments totaled $2.4 billion as of end-June. The total public sector external debt decreased to $38 billion from $39.2 billion (end-March) with net principal repayments amounting to $245 million. About 83.5 percent are government borrowings.

Private sector external debt, on the other hand, went up to $34.2 billion as of end-June from $34 billion in the previous quarter.

“The country’s level of external debt has continued to decline in recent years (from $77.7 billion as of end-2014 to $72.2 billion in June 2018) which may be attributed to prudent debt management and Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize FX risk,” said the BSP in a report.