Foreign debt payments 74% costlier in 2023

Bangko Sentral ng Pilipinas. (File photo / Philippine Daily Inquirer)

MANILA — Philippine external debt payments nearly doubled to $14.7 billion in 2023 as high interest rates jacked up both principal and interest settlements, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Payments made by public and private sector borrowers for their foreign liabilities jumped by 73.9 percent last year compared with the $8.48 billion that was settled in 2022, the BSP reported.

Figures showed that principal payments in 2023 had amounted to $7.71 billion, also 73.9 percent larger than the $4.61 billion that was settled in the preceding year.

Meanwhile, interest payments went up by 81.84 percent to $7.04 billion.

This brought the Philippine debt service ratio—which relates principal and interest payments to exports of goods and receipts from services and primary income—to 10.2 percent by the end of 2023, from 6.3 percent a year ago amid “rising interest rates,” the BSP said.

READ: PH debt still manageable, says Finance chief

To recall, the BSP raised its policy rate by a total of 450 basis points in the current cycle to rein in inflation, among the most aggressive in Asia. The key rate is currently at 6.5 percent, the highest in more than 16 years.

Overall, the heavier debt service burden coincided with the rise in Philippine external debt, which hit a record high of $125.4 billion by the end of 2023.

Still at prudent levels

As a share of the economy, external debts remained at “prudent levels” despite slightly rising to 28.7 percent in the fourth quarter of 2023, from the 28.1 percent ratio recorded in the third quarter.

The surge in the external debt level was largely due to fresh liabilities amounting to $4.9 billion incurred by both private and public sector borrowers.

READ: PH foreign debt burden eased slightly in Q3

Private sector borrowings in the last quarter of 2023 were mainly driven by the $3-billion syndicated loan deal availed by a nonbank firm from offshore banks.

The BSP said proceeds from those borrowings had been used to finance the capital expenditures and maturing obligations of the company.

The government, meanwhile, tapped official creditors and the Islamic finance market through the maiden issuance of the $1-billion 5.5-year dollar-denominated sukuk bond to fund general financing requirements, infrastructure projects and social welfare programs. INQ