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Foreign debt service down 37.32%

The Philippines continues to pare down its foreign debt servicing to $1.538 billion as of end-March this year or 37.32 percent less than the $2.454 billion in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported.

Based on the BSP record, the country’s external debt servicing has remained manageable with interest payments decreasing to $809 million as of the end of the first quarter or 49.24 percent lower from $1.594 billion in 2013.

Both public or government and private sector or corporates also paid less principal amounts of $729 million during the quarter, down 15.23 percent from $860 million.

The external debt service ratio, which is the ratio of total principal and interest payments relative to total exports of goods and receipts from services and primary income, has further improved to 6.5 percent in March from eight percent in 2013, said the BSP last Friday.

“(This is) due to higher FX (foreign exchange) receipts and lower payments during the 12-month period,” the BSP explained.

The central bank’s confidence in its external debt management stemmed from a debt service ratio that has continued to be well below the international benchmark range of 20 percent to 25 percent which indicates the country’s strong liquidity position.

As of end-March this year, the country’s outstanding external debt amounted to $58.3 billion, 1.2 percent lower from March, 2013’s $59 billion.

BSP Governor Amando M. Tetangco Jr. reiterated that all key external debt indicators were kept at “prudent levels”. The total foreign debt is equivalent to 21.5 percent of Philippine GDP, an improvement from last year’s 22.8 percent.

The Philippines’ external obligations remained predominantly medium to long-term (MLT) in nature, and the weighted average maturity is 20.1 years for all MLT accounts. Public sector debt has a longer average tenor of 22.1 years compared to 9.6 years for the private sector.

The total public sector debt increased to $40.8 billion at the end of the first quarter, from $40.5 billion as of end-2013. Borrowings from the private sector slid to $17.6 billion from $18 billion due to net repayments mainly for bank liabilities.

For 2014, the BSP has imposed a foreign borrowing cap of $5 billion, the same limit imposed in 2013. The limit covers both the government or public sector and the corporate or private sector foreign borrowing.

The debt service burden – both principal and interest – are payments on fixed medium and long-term credits including the International Monetary Fund credits and loans covered by the Paris Club and commercial banks rescheduling and new money facilities. The interest payments also include those on fixed and revolving short-term liabilities of banks and non-banks.