Foreign debt service surges 29%

On weak peso

The combined government and corporate sector’s external debt service burden rose by 28.78 percent to $6.389 billion as of end-November from $4.961 billion the same period in 2015 as the peso became Asia’s worst performing currency in 2016.

The local currency lost more than five percent in 2016 against the US greenback in 2016. So far in 2017, it has depreciated by 1.3 percent and broke the R50:$1 support on February 21. It further depreciated to R51.40 as of last week.

The debt service burden has been on a declining trend, generally, with occasional increases due to a slightly higher external debt stock and adjustments to foreign exchange rates.

Debt service burden is composed of the principal and interest payments on fixed medium and long term foreign loans from both the public and private sector. It does not include loan prepayments and principals of shortterm liabilities reported by banks and non-banks.

Based on data from the Bangko Sentral ng Pilipinas (BSP), principal debt service payments increased by 57.36 percent to $4.071 billion as of endNovember from the same period in 2015 of $2.587 billion.

Interest payments, however, fell 2.27 percent to $2.319 billion from $2.373 billion.

The external debt service burden is one of the key indicators used by the BSP to monitor both the public and private sector’s capacity to pay principals and interests on their foreign obligations.

The country’s outstanding external debt stock was up by $1 billion to $76.6 billion as of end-September 2016, about 1.3 percent more year-on-year from $75.6 billion.

According to the central bank, public sector borrowings totaled $39.3 billion as of end-September 2016, down by $74 million from $39.4 billion in June 2016, although the share to total increased to 51.3 percent from 50.7 percent.

Private sector debt also declined by a larger amount from $38.4 billion to $37.3 billion which pushed the share of public sector accounts to total external debt higher.

The BSP noted some net repayments as of end-third quarter last year amounting to $421 million and previous periods’ adjustments of $653 million due to late reporting of loan payments and foreign exchange revaluation adjustments of $25 million.

External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.

BSP Governor Amando M. Tetangco Jr. has said that all key external debt indicators “remained at comfortable levels in the third quarter of 2016.”

As for the peso, the