THE country’s debt service burden declined by almost 20 percent in April from a year earlier, the Bangko Sentral ng Pilipinas (BSP) reported late Friday.
Preliminary data showed that the debt service burden plunged 19.8 percent to $4.64 billion as of end-April from $5.79 billion in the same period last year.
Principal payments also fell by 41.5 percent to $2.12 billion from $3.61 billion, but interest payments slightly increased by 16.3 percent to $2.53 billion from $2.17 billion.
The debt service burden includes principal and interest payments on medium- to long-term credits like those from the International Monetary Fund, loans subject to Paris Club agreements and debt restructuring by commercial banks, as well as New Money Facilities.
It also includes interest payments on fixed and revolving short-term liabilities of banks and nonbanks but not prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities.
The country’s outstanding external debt reached $128.69 billion as of end-March, about 8-percent higher compared to the year-earlier figure of $118.81 billion.
Broken down, $78.90 billion of the amount was owed by the public sector, up 4.97 percent from the $75.16 billion recorded in the same period in 2023.
Private-sector debt amounted to $49.79 billion, 14.06 percent higher than the $43.65 billion reported at the end of March last year.
As a percent of gross domestic product (GDP), the debt service burden declined to 3.0 percent as of the first quarter of 2024 from 4.3 percent a year earlier.
External debt, meanwhile, was equivalent to 29.0 percent of GDP from 28.9 percent as of end-March.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decline of the government’s debt servicing in April was due to larger external debt maturing last year compared to smaller matured foreign debt this year.
“For the coming months, possible cuts in Fed and local policy rates that led to lower local bond yields would help ease the external debt service bill in terms of lower interest payments on them,” Ricafort said, referring to the US Federal Reserve.
The BSP policymaking body Monetary Board is set to meet in August and signaled that a possible rate cut of 25 basis points could be delivered.
Benchmark rates currently stood at 6.5 percent, the highest since 2007.
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