Philippines pays less on foreign debts

Principal payments down 23% in 8 months

MANILA, Philippines — The country’s debt service burden decreased to $8.68 billion as of end-August, mainly driven by the double-digit decline in principal payments, preliminary data released by the Bangko Sentral ng Pilipinas showed.

Based on BSP data, the country’s debt service burden was 3.8 percent lower than the $9.02 billion recorded in January to August last year.

This translated to a lower debt service burden to gross domestic product (GDP) ratio of 3.2 percent in end-August from 3.6 percent in the comparable year-ago period.

During the eight-month period, principal payments dropped by 23.3 percent to $3.46 billion from last year’s $4.51 billion.

Meanwhile, interest payments rose by 15.6 percent to $5.22 billion in the first eight months from $4.51 billion in the same period last year.

The debt service burden represents principal and interest payments after rescheduling.

It consists of principal and interest payments on fixed medium and long-term credits, including International Monetary Fund credits, loans covered by the Paris Club and commercial banks’ rescheduling and new money facilities.

It also includes interest payments on fixed and revolving short-term liabilities of banks and non-banks, excluding prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and non-banks.

The country’s foreign debt stood at $130.18 billion as of end-June, rising by 10.4 percent from the $117.92 billion level a year ago, and by 1.2 percent from $128.69 billion a quarter ago.

Amid the increase, the country’s external debt-to-GDP ratio improved to 28.9 percent as of the second quarter from 29 percent in the first quarter.

Public sector external debt grew by 1.2 percent to $79.83 billion as of end-June from $78.9 billion as of end-March, with share to total at 61.3 percent.

During the quarter, private sector debt rose to $50.36 billion from $49.79 billion in end-March, resulting in a share of 38.7 percent.

Major creditor countries include Japan with $14.25 billion followed by the Netherlands with $4.31 billion and the United Kingdom with $4.17 billion. In terms of currency mix, the country’s debt stock remained largely denominated in dollars with 77 percent followed by Japanese yen with 7.7 percent.

The national government borrows heavily from foreign and domestic creditors to finance the country’s budget deficit as it spends more than what it actually earns.