THE country’s latest external debt service data released by the Bangko Sentral ng Pilipinas (BSP) sends a warning to policymakers regarding taking in more foreign debts, according to local economists.
The data showed the country’s external debt service already reached $148.87 billion in the January to June period this year. This showed that in the six-month period, external debt service already breached the total of $137.63 billion posted in the whole of 2024.
The external debt service data showed the government accounted for the bulk of the amount at $94.8 billion in the six-month period. This was 18.76 percent higher than the $79.825 billion posted in the same period last year.
‘This is a warning signal, though not necessarily a fatal one. It underscores the growing burden of foreign liabilities, higher amortization schedules, and interest cost pressures,’ Philippine Institute for Development Studies (PIDS) Senior Fellow John Paolo Rivera told BusinessMirror.
‘The concern is that this could strain forex reserves, tighten fiscal space, and heighten rollover risk especially if global rates stay elevated or the PHP [Philippine peso] weakens further,’ he added.
However, Union Bank Chief Economist Ruben Carlo Asuncion told this newspaper that the latest data ‘is not alarming’ given the country’s external debt to GDP ratio stands at 31.2 percent.
He added that the country’s dollar reserves or the Gross International Reserves (GIR) stood at $105.3 billion and could still ‘provide strong cover’ for the country’s debts and import receipts.
‘The increase reflects valuation effects and planned borrowings, not distress,’ Asuncion told this newspaper on Monday.
Meanwhile, private external debt service data showed a 7.38-percent growth to $54.07 billion in the January to June period this year, compared to the $50.36 billion posted in the same period last year.
Moving forward, Rivera said the national government must implement stronger debt management strategies which includes lengthening debt maturities and favoring concessional or low-cost borrowing.
Rivera said these strategies also include debt swaps and buybacks, as well as keeping a ‘prudent’ debt mix between domestic and external sources.
Asuncion added that the government should endeavor to maintain the 80-20 borrowing strategy that favors domestic over external sources.
‘Importantly, improving revenue mobilization and ensuring efficient public spending are key to sustaining the country’s ability to service external obligations without compromising development goals. The degree of corruption in the country also makes managing this more challenging,’ Rivera told BusinessMirror.
Earlier, the government’s retail treasury bond (RTB) drove the surge in borrowings in August, pushing total gross borrowings in eight months to P2.266 trillion.
Latest data from the Bureau of the Treasury (BTr) showed the government’s gross borrowings for August surged by 192.19 percent to P508.526 billion from last year’s P174.034 billion.