MANILA, Philippines — The Philippines’ external debt service burden has dropped by 21.5 percent in April to $2.148 billion compared to the same period in 2011 due to some prepayments and foreign exchange adjustments, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Of the $2.148 billion total foreign debt service, the BSP said that principal debt accounted for $1.087 billion or 40 percent lower from $1.812 billion in April last year. The rest went to interest payments of $1.061 billion, which reflected a 14.8 percent increase from last year’s $924 million.
The BSP expects external debt indicators to continue to be manageable for years to come due to demand for debt papers and improved credit grades for these bonds and securities.
The country’s external debt, reported quarterly by the BSP, totaled $62.9 billion as of the end of the first quarter. It was 3.2 percent higher year-on-year and equivalent to 27.4 percent of the domestic economy’s size. External debt vis-à-vis the gross domestic product has been declining substantially since 2004, from a ratio of 68.61 percent to 27.4 percent as of end-March.
The projection for this year’s foreign debt service burden was originally pegged at $8.8 billion but this was based on a higher peso-dollar exchange rate. The servicing of foreign loans is now expected to decline as it is sensitive to currency movements. Majority of foreign debt are denominated in US dollars.
In 2011, debt service for Philippine foreign debt amounted to $7.47 billion, lower than the projected $8.5 billion. The projection is usually higher because the BSP has to consider worst-case scenarios especially for the yen-denominated loans. Last year’s debt service burden is however 2.16 percent higher than 2010’s $7.32 billion.
In the meantime the BSP’s Early Warning System (EWS), which it uses for assessing debt sustainability, is projected to remain within expected levels in the next five years.
The EWS threshold for foreign loans to GDP ratio is expected to remain within contained levels based on the BSP’s projected nominal GDP and the country’s outstanding loans.
The BSP in a report earlier said that the EWS threshold for external debt to GDP ratio of 72.45 percent will probably remain and not breached in the next five years. The EWS have a threshold of 25 percent. The range of ratios is projected from 32.6 percent to 42.2 percent only.
The latest outstanding debt show the Philippines’ sufficient foreign exchange earnings are enough to service maturing principal and interest payments for 2012.
To control the size of foreign debt from the public or government and private or corporate sectors the central bank is strictly imposing an annual debt ceilings on foreign approvals. The cap this year is $8.5 billion, lower compared to 2011’s $10.5 billion.
source: mb.com.ph