Debt service burden climbs to $13.6B

Bangko Sentral ng Pilipinas

THE country’s debt service burden surged by 104.78 percent to $13.6 billion as of the end of November 2023 from $6.7 billion a year earlier, preliminary Bangko Sentral ng Pilipinas (BSP) data showed.

Both principal and interest payments ballooned during the 11-month period, the former by 76.2 percent to $7.3 billion from $4.2 billion and the latter by almost 153 percent to $6.3 billion from $2.5 billion.

The debt service burden includes principal and interest payments on medium- to long-term credits like those from the International Monetary Fund, loans subject to Paris Club agreements and debt restructuring by commercial banks, as well as New Money Facilities.

It also includes interest payments on fixed and revolving short-term liabilities of banks and nonbanks but not prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities.

The country’s outstanding external debt, meanwhile, reached $118.83 billion as of end-September, some 10 percent higher compared to year-earlier $107.91 billion.

Broken down, $73.70 billion of the amount was owed by the public sector, up 13.76 percent from $64.79 billion.

Private-sector debt totaled $45.13 billion, 4.6 percent higher than the $43.12 billion recorded during the year-earlier period.

As a percentage of gross domestic product (GDP), the debt service burden rose to 3.5 percent as of end-September from 1.6 percent a year earlier.

External debt, meanwhile, was equivalent to 28.1 percent of GDP, up from 26.8 percent.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that debt repayments surged due to a significant rise in global interest rates from 2022.

Borrowings aimed at hedging against the same interest rate increases also drove the debt servicing bill higher, he added.