The Philippines’ external debt service burden slipped by 6.2 percent to $6.72 billion in the first half from $7.16 billion in the same period last year, according to the latest data from the Bangko Sentral ng Pilipinas (BSP).
Of the total, interest payments dipped by 0.7 percent to $3.95 billion, while principal payments fell by 13.1 percent to $2.77 billion from $3.19 billion a year ago.
The debt service burden (DSB) remained within manageable levels relative to the country’s external receipts. It accounted for 21.1 percent of export shipments and 8.7 percent of exports of goods, services and primary income from January to June.
The DSB refers to the combined principal and interest payments made by the country to settle its foreign loans. These include amortizations on medium- to long-term borrowings as well as interest on short-term credit lines obtained from foreign creditors.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the lower debt service burden was due to the lower share of foreign borrowings to better manage foreign exchange risks.
Ricafort explained that most of the government’s external debt is long-term in nature, with the longest possible tenor.
‘Possible inclusion in J.P. Morgan Emerging Market Global Bond Index would help sentiment or demand for Philippine bonds, which could help lower the government’s borrowing costs,’ he said.
The country’s outstanding external debt climbed to a fresh record high of $148.87 billion as of end-June, but the BSP earlier said that foreign debt remains sustainable with key indicators showing manageable levels.
The latest figure was 1.5 percent higher than the previous quarter’s $146.74 billion, mainly due to the weakening of the dollar, which raised the dollar-equivalent of borrowings in other currencies by $1.49 billion.
The Philippines borrows externally to finance public infrastructure, social services and other development programs, as well as to diversify funding sources and take advantage of favorable terms from foreign lenders. Local banks and companies also tap offshore markets to fund expansion and investment needs.