THE debt service bill on foreign borrowing was nearly $5.9 billion in the five months to May, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).
Debt service rose 0.51% to $5.869 billion in the first five months, from $5.839 billion a year earlier.
Principal payments rose 2.68% in the first five months to $2.645 billion. Interest payments declined 1.23% to $3.224 billion.
The debt service burden represents principal and interest payments after rescheduling, according to the BSP.
These totals include principal and interest payments on fixed medium- and long-term credits, including International Monetary Fund credits, loans covered by the Paris Club and commercial bank rescheduling, and New Money Facilities.
They also cover interest payments on fixed and revolving short-term liabilities of banks and nonbanks.
The debt service data exclude prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and nonbanks.
“The external debt service burden is largely a function of matured foreign debt versus year-ago levels, in view of the fact that the NG (national government) borrowings increased since the COVID-19 pandemic started in March 2020,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said via Viber.
Mr. Ricafort noted, however, that most of the NG’s foreign debt is long-term, “some of which have started to mature and have increased since the pandemic.”
The Bureau of the Treasury reported that gross borrowing rose 78.16% to P263.99 billion in June, driven by both domestic and foreign debt.
Mr. Ricafort added that the net increase in US interest rates since the pandemic were a factor, “offset by the total Fed rate cuts of minus 1 percentage point since September 2024 and the possible half percentage point Fed rate cuts for the balance of 2025,” he said.
The Federal Reserve is expected to deliver its first interest rate cut this year in September, followed by another before year’s end, Reuters reported.
As of May, the debt service burden as a share of gross domestic product (GDP) fell to 2.8% from 3.1% a year earlier.
Outstanding external debt grew 14.02% to $146.737 billion at the end of March, consisting of $91.535 billion in public-sector debt and $55.202 billion in private-sector debt.
This brought the external debt-to-GDP ratio to 31.5%, up from 29% a year earlier.
The BSP’s external debt data cover borrowings of Philippine residents from nonresident creditors, regardless of sector, maturity, creditor type, debt instruments or currency denomination.
The central bank gathers data on external debt through reports submitted by borrowers, banks, and major foreign creditors. — Katherine K. Chan