Foreign debt service down 2.43%

The country’s external debt service burden dipped to $2.77 billion as of end-April, 2.43 percent lower compared to the same period last year of $2.84 billion as both government and private sector continue to have sufficient foreign exchange to pay for maturing loans.

Data from the central bank showed that, principal payments decreased by one percent to $1.92 billion from $1.94 last year. Interest payments also fell to $854 million from $902 million or down by 5.3 percent year-on-year.

The Philippine external debt amounted to $73.8 billion at the end of the first quarter, about $3.8 billion lower from the same period in 2016 of $77.6 billion.

The debt service burden is the principal and interest payments on all foreign debt both public and private sector, and by computing the debt service ratio (DSR) with debt service burden, foreign debt borrowers show a capacity to meet obligations. This means there is sufficient foreign exchange earnings to pay for maturing loans.

The DSR remains at single-digit level and below the 20 percent to 25 percent international benchmark band. The BSP noted that the country’s external debt ratio which is also a solvency indicator, continue to improve to 20 percent as of end-March from 21.9 percent same time in 2016.

Public sector external debt slightly increased to $37.7 billion in the first quarter compared to $37.5 billion in the previous quarter (end-December 2016). This is about 51 percent of total outstanding foreign debt.

A total of $36.1-billion debt have been incurred by the private sector as of end-March – accounting for 49 percent of total – and this was lower than the previous quarter’s $37.2 billion.

The BSP this year has scrapped the cap or ceiling it used to impose on both public and private sector foreign borrowings.

The BSP has made it mandatory for both the government and the corporate sector to submit foreign borrowing plans each year to enable them to monitor the “magnitude and timing” of foreign financing requirements which would help the BSP in their capital flows projections and its implications on the economy.

Last year, the BSP’s foreign borrowing limit was $5 billion for both public and private sector, it is the same cap imposed since 2013.