Foreign debt servicing on a downtrend – BSP

The public and the private sector’s external debt service burden dropped further to $2 billion as of end-April, recording a 3.5-percent decline compared to the same period in 2014 of $2.08 billion.

Debt service burden represents principal and interest payments on fixed medium to long-term credits including the International Monetary Fund credits and new money facilities. It also includes interests paid on fixed and revolving short-term liabilities of banks and non-banks

Data from the Bangko Sentral ng Pilipinas (BSP) showed that as of endApril, principal payments decreased by 1.17 percent to $1.09 billion from $1.10 billion, while interest payments amounted to $914 million, registering a 6.25 percent year-on-year decline or from $975 million.

A declining debt service means the public and private sectors are managing foreign loan payments with enough foreign exchange supply, making prepayments also an option.

The BSP in June reported that the country’s outstanding external debt stood at $75.3 billion as of end-March, three percent lower from $77.7 billion at the end of 2014.

BSP Governor Amando M. Tetangco Jr. said that all “key external debt indicators (have) remained at very prudent levels.” This includes debt service burden and the debt service ratio – both are solvency indicators.

The debt service ratio or the total principal and interest payments as a percentage of exports of goods, receipts from services and primary income, continue to improve. It is a measure of the “adequacy of the country’s foreign exchange earnings to meet maturing obligations.”

Based on the latest external debt data provided by the BSP, the debt service ratio improved to 6.3 percent in March from 6.4 percent in December 2014 and 7.3 percent in March 2014 due to higher receipts and lower payments during the year.

The public sector had total external debt of $39.1 billion which was only slightly lower from end-December’s $39.3 billion. Public sector debt represented 52 percent of total external debt.

The corporate or private sector had borrowings of $36.2 billion which was lower than the previous quarter’s $38.3 billion. This was due to bank repayments amounting to $2.9 billion.