External debt service up 6% in November

The Philippines’ external debt service burden as of end-November 2018 was up six percent to $7.199 billion compared to $6.786 billion same time in 2017 on account of new borrowings to fund various infrastructure projects, the central bank’s latest data showed.

Principal payments during the period totaled $4.559 billion, just 2.12 percent more than the previous year’s $4.464 billion. Interest payments, in the meantime, increased by 13.64 percent year-on-year to $2.640 billion from $2.323 billion.

Bangko Sentral ng Pilipinas (BSP) data also showed that the country’s external debt service burden is equivalent to 2.6 percent of gross domestic product (GDP) as of endSeptember 2018, higher than the previous year’s 2.3 percent.

The total outstanding debt – which as of end-third quarter 2018 amounted to $76.415 billion – was 23.5 percent of GDP, almost unchanged from end-September 2017’s 23.4 percent.

The debt stock was up 5.6 percent or by $4 billion year-on-year because of new borrowings which exceeded loan repayments, according to the BSP. These new borrowings are financing for infrastructure development mostly, while corporates have new foreign loans for working capital, funding base and to extend term liabilities.

Government or public sector debt, which accounted for 52 percent of total foreign loans, stood at $39.545 billion as of end-September 2018, up from $37.231 billion in 2017. Private sector debt also increased to $36.870 billion from $35.126 billion.

The central bank closely monitors the foreign borrowing of both the public and private sector for its impact on liquidity, interest rates and foreign exchange. Foreign financing requirements of corporates also help the BSP in their capital flows projections and its implications on the economy.

The country’s external debt service burden visà-vis the gross international reserves (GIR) was lower at 978.4 percent compared to end-September 2017’s 1,072 percent.

BSP Deputy Governor Diwa C. Guinigundo said GIR is still considered “ample external liquidity buffer” and provides adequate cover for foreign loans.

At the end of 2018, GIR stood at $78.46 billion. For 2019, the BSP expects a GIR of $77 billion.