The national government’s debt servicing dropped by 12 percent in the 10 months to October as it spent less on repayments while incurring more new loans, but the Bangko Sentral ng Pilipinas said the debt stock—particularly foreign borrowings—remained at a prudent level.
From January to October, the Philippines shelled out a total of P929.7 billion in interest and principal payments on its borrowings, a decrease of 12 percent from the P1.05 trillion paid out in the same period of 2021.
Data from the Bureau of the Treasury show that in those 10 months, a total of P433.2 billion was spent on interest payments, showing an increase of 17 percent from the yearago P370.9 billion.
At the same time, a total of P496.5 billion in principal was repaid, a 27-percent plunge from P682 billion in the first 10 months of last year.
In full-year 2021, the government spent P1.2 trillion on debt servicing, an increase of 25 percent from P962.47 billion in 2020.
The Philippines’ debt stock stood at 63.7 percent of the nation’s wealth in terms of good sand services produced and paid for within the country as of the end of September, when it amounted to P13.52 trillion.
Of the total outstanding obligations, 31 percent or P4.22 trillion is owed to foreign lenders while 69 percent or P9.3 trillion is borrowed from domestic lenders.
‘Prudent’ levels
The BSP said external debt continued to represent 26.8 percent of gross domestic product (GDP) over the three months from June 2022.
“The low [external debt] to GDP ratio, a solvency indicator, indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term,” the central bank said.
The BSP added that this ratio also remained one of the lowest when compared to other member countries of the Association of Southeast Asian Nations, while other key external debt indicators also remained at prudent levels.
For one, the regulator’s gross international reserves stood at $93 billion as of end-September 2022, representing 5.7 times cover for short-term debt based on the original maturity concept.
For another, the debt service ratio (DSR) dropped to 5.4 percent from 8.2 percent recorded for the same period last year due to lower repayments accompanied by higher receipts.
Relating principal and interest payments to exports of goods and receipts from services and primary income, the DSR is a measure of adequacy of the country’s foreign exchange earnings to meet maturing obligations.
As of end-September, the maturity profile of the country’s external debt remained predominantly medium- and long-term—85 percent of the total matures at longer than one year.
Bilateral lenders
The Philippines’ biggest lenders are Japan ($13.1 billion), the United Kingdom ($3.3 billion), and the United States ($3.1 billion).
Loans from official sources—multilateral and bilateral creditors—had the largest share of total outstanding debt at 38 percent.
Borrowings in the form of bonds and notes accounted for one-third of foreign borrowing while obligations to foreign banks and other financial institutions accounted for 22.5 percent of total.
The Philippines’ external debt stock continues to be largely in US dollars (58 percent) while the remainder are in Japanese Yen (8 percent). INQ