Debt service burden slips to $10 billion in 9 months

MANILA, Philippines, December 28 ------ The country’s external debt service burden decreased by 21 percent from January to September this year compared to the same period last year, according to the latest data from the Bangko Sentral ng Pilipinas.

The BSP reported a lower debt service burden of $10.08 billion during the nine-month period from $12.78 billion in the same period last year, driven by lower interest payments and a significant reduction in principal payments. Of the total, interest payments slipped by 0.6 percent to $5.91 billion from $5.95 billion a year ago.

Principal payments fell by 39 percent to $4.17 billion from January to September compared to $6.84 billion in the same period last year. The debt service burden represents the total of principal and interest payments the country makes to repay its foreign debts. This covers amortization of medium- to long-term loans as well as interest on short-term borrowings from international creditors.

Meanwhile, the debt service remained within manageable levels relative to the country’s external receipts. It accounted for 21.1 percent of export shipments and 8.5 percent of exports of goods, services and primary income from January to September. The country’s gross domestic product is $352.04 billion, based on the BSP data.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the country’s favorable credit rating signals a strong investor confidence, which could help lower borrowing costs and reduce the government’s debt servicing. “Favorable credit ratings of the country at one to three notches above the minimum investment grade… thereby would reduce borrowing costs and also help reduce the national government’s borrowing costs and also help reduce borrowing and payment terms,” Ricafort said. He added that overall national governments borrowings, both external and domestic, would depend on or be a function of future budget deficits to be financed.

“Fiscal reform, tax reform, anti-corruption, good governance reform measures would help narrow the budget deficit and, in turn, reduce the need for the national government to borrow more locally and from abroad to finance the budget deficit,” Ricafort said.

Source: philstar.com