Debt service or payment of the country’s external debt continued to decline at the end of June to $3.17 billion, down 42.4% from the same period last year of 5 .51 billion dollars, because the government does not repay the external debt in advance.
Data from Bangko Sentral ng Pilipinas (BSP) showed that since the government did not prepay external debt, the main external debt service fell 58.7% to $1.81 billion, compared to 4.39 billion dollars at the end of June 2021.
Interest payments, meanwhile, rose to $1.36 billion from $1.12 billion in the same period last year, an increase of 21.4%.
The main external debt service consists mainly of short-term fixed and revolving liabilities. When the government or the private sector prepays, these are loans and bond buybacks or redemptions. The debt service charge, which represents both principal and interest payments after rescheduling, is made up of medium and long-term fixed credits which include credits from the International Monetary Fund, other loans and facilities.
BSP has recently adopted a more accurate debt monitoring and external debt data management system to improve its analysis and early warning signals.
BSP is implementing an updated debt management and financial analysis system (SYGADE) 6 as part of the mandates on external debt management. DMFAS,
database software currently adopted by 105 ministries of finance, central banks and other debt management offices in 69 countries, will be used to record, track, report and analyze available debt data.
Last week, the BSP released the latest external debt data of $107.69 billion at the end of June, up 6.4 percent from $101.19 billion in the same period last year. .
The current debt stock is 26.8% of gross domestic product (GDP). This is a lower GDP ratio compared to 27.5% at the end of March. Regarding the BSP, the external debt-to-GDP ratio still indicates the Philippines’ “strong and enduring position” to service medium- and long-term foreign borrowings.
This is despite the fact that at $107.69 billion, the country’s outstanding external debt is above the exchange buffer of $99 billion at the end of August.
Meanwhile, the debt service ratio or DSR improved to 5% from 9.5% in the same period last year due to lower repayments and higher receipts. The DSR, which relates principal and interest payments or the debt service burden to exports of goods and services receipts and primary incomes, is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing bonds.
At the end of June, public sector external debt stood at $65.7 billion, of which the government accounted for 87.8% of the total. Private sector debt was $42 billion.
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