External debt service up 7.6% to $5.92 B in 10 months

The Philippines’ 10-month external debt service burden increased by 7.56 percent year-on-year to $6.37 billion from $5.92 billion, data from the Bangko Sentral ng Pilipinas (BSP) show.

Principal and interest payments – minus prepayments on future loan maturities – also went up to $4 billion and $2.37 billion, respectively.

Principal external debt service increased by 5.32 percent from same time last year of $3.79 billion while interest payments was up by 11.57 percent from $2.12 billion.

As of end-September 2018, the country’s latest external debt figure stood at $76.4 billion, up by 5.6 percent year-on-year, which the BSP still refers to as “within prudent and manageable levels.” Its ratio to GDP was slightly up at 23.5 percent from 23.4 percent end-September 2017. The debt service burden to GDP also rose to 2.5 percent at the end of the third quarter versus the previous year’s 2.3 percent.

As for debt service ratio (DSR), which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, the BSP said this increased to 6.5 percent from six percent as of end-September last year. The DSR measures the level of adequacy of the country’s FX earnings to meet maturing debt obligations.

Public sector borrowings increased to $39.5 billion as of end-September from end-June’s $38 billion. Private sector debt also rose to $36.9 billion from the previous quarter’s of $34.2 billion. Government borrowings accounted for 52 percent of total outstanding foreign debt.

The central bank closely monitor the foreign borrowing of the public sector since any plans from the government to source offshore funds have to first secure a Monetary Board opinion and eventually, a BSP approval.

Based on BSP data, loans from official sources such as multilateral and bilateral creditors, totaled $24.8 billion as of end-September. This is around 32.4 percent of total outstanding debt. About 29.8 percent are foreign holders of bonds and notes, and 29.6 percent are obligations to foreign banks and other financial institutions. The rest or 8.1 percent, are loans from other creditor types.

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.

All banks, foreign parent companies and affiliates are required to disclose foreign borrowing plans to the BSP. Resident entities borrow offshore via the issuance of bonds or securities in the international capital markets.