ASEAN KEY DESTINATIONS
Foreign debt service up 21.74%
The public and private sectors paid $5.152 billion in external debt service burden as of end-third quarter last year, higher by 21.74 percent compared to the same period in 2015 of $4.23 billion due in part to the weakness of the peso, the Bangko Sentral ng Pilipinas (BSP) reported.
Of the $5.152 billion total, $3.215 billion are the principal amount and $1.937 billion are interest payments. Compared to the previous year, principal payments are higher by 43.85 percent but interest costs fell by three percent from $2.235 billion and $1.997 billion respectively.
The country’s outstanding external debt stock rose to $76.6 billion as of end-September, up by 1.3 percent year-on-year from $75.6 billion. Foreign debt rose due to foreign exchange revaluation adjustments amounting to $1.6 billion and from non-resident investments in domestic debt papers issued offshore which also increased by $428 million.
Debt service burden are principal and interest payments on fixed medium and long term foreign loans from both the public and private sector. It does not include loan prepayments and principals of short-term liabilities reported by banks and non-banks.
The external debt service burden is one of the key indicators used by the BSP to monitor both the public and private sector’s capacity to pay principals and interests on their foreign obligations.
According to the central bank, public sector borrowings totaled $39.3 billion as of end-September 2016, down by $74 million from $39.4 billion in June 2016, although the share to total increased to 51.3 percent from 50.7 percent.
“The decline in level was due largely to net repayments of $161 million and an increase in residents’ investments in Philippine debt papers ($27 million), whose impact was partly offset by foreign exchange revaluation adjustments ($121 million),” explained the BSP.
Private sector debt declined by a larger amount from $38.4 billion to $37.3 billion which pushed the share of public sector accounts to total external debt higher.
There were net repayments of $421 million made during the period, as well as previous periods’ adjustments (negative $653 million) due to late reporting of loan payments and foreign exchange revaluation adjustments (negative $25 million).
“An increase in non-resident holdings of private sector debt papers ($75 million) partly mitigated the decline in private sector debt,” said the BSP.
The debt service burden has been on a declining trend, generally, with occasional increases due to a slightly higher external debt stock and adjustments to foreign exchange rates. The peso – considered the worst performing regional currency in 2016 – has remained weak versus a stronger US dollar.
The external debt ratio which is a solvency indicator or total outstanding debt expressed as a percentage of annual aggregate output, improved to 21.1 percent from 21.7 percent in June, 2016 and 21.5 percent a year ago, noted the BSP.
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