External debt service up 22.15% – BSP

The country’s external debt service burden increased by 22.15 percent yearon-year to $1.235 billion in January this year from $1.011 billion in January 2017, according to data from the Bangko Sentral ng Pilipinas (BSP).

Principal debt servicing amounted to $937 million for the month, up 35.20 percent from the same period in 2017 of $693 million. Interest payments were down by 6.58 percent to $298 million from $319 million.

Based on the latest central bank external debt figures, the debt service ratio which relates debt service burden to exports of goods and receipts from services and primary income, continue to show the adequacy of public and private sector’s foreign exchange earnings.

In 2017, the debt service ratio improved to 6.2 percent compared to seven percent in 2016. The BSP said the ratio is well below the 20 percent to 25 percent international benchmark range.The debt service burden to current account receipts, on the other hand, also dropped to 5.8 percent from 6.6 percent in 2016.

At the end of 2017, the country’s outstanding external debt reached $73.09 billion, down by 2.22 percent year-on-year from $74.76 billion.

The debt service burden last year also dropped two percent to $7.05 billion from $7.19 billion. These are principal and interest payments on fixed medium to long term credits, loans and new money facilities. Interest payments also include fixed and revolving short-term liabilities of both banks and non-banks.

During the year, private sector accounts out of the total outstanding foreign debt were lower by 4.6 percent to $35.6 billion from $37.3 billion. These represented 48.7 percent total external debt.

The BSP said the decline was due to the non-bank sector which borrowed less with $20.2 billion from $22.2 billion in the previous year.

“This is consistent with the downward trend in loans from commercial sources (banks and other financial institutions, which are main sources of corporate funding) from the $25.8 billion level recorded a year ago to $22.5 billion,” explained the BSP.

The decrease also translated to a drop in US dollar-denominated borrowings from $48.6 billion to $45.6 billion last year. “These developments may be indicative of Philippine corporate borrowers’ deleveraging from foreign borrowings to minimize foreign exchange risk, among others,” said the BSP.