External debt payments down by 3.8% at end-Aug.

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES’ external debt service burden fell at the end of August as principal payments declined, preliminary data from the central bank showed.

Data from the Bangko Sentral ng Pilipinas (BSP) showed debt servicing on external borrowings dropped by 3.8% to $8.68 billion in the January-to-August period from $9.023 billion a year ago.

Broken down, principal payments fell by 23.3% year on year to $3.461 billion from $4.511 billion.

On the other hand, interest payments rose by 15.6% to $5.218 billion in the first eight months from $4.512 billion.

“The decline in external debt may fundamentally reflect the net payment of maturing foreign debt and less availment of new US dollar and other foreign currency borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He noted this was likely a “matter of prudence” by the government to prioritize domestic borrowings in order to mitigate foreign currency risk.

The peso strengthened to P56.111 per dollar at end-August from its finish of P58.365 at end-July.

“However, it is also a delicate balance in ensuring diversified borrowings, not just solely concentrated on domestic borrowings, that could still include some foreign borrowings,” Mr. Ricafort added.

“Foreign borrowings could also be managed properly with the right foreign exchange view based on market and economic cycles, such as whenever the US dollar corrects lower versus major global currencies amid Fed rate-cutting cycles.”

Finance Secretary Ralph G. Recto earlier said the National Government is aiming to lower the share of external borrowings in its borrowing program.

The government’s borrowing mix is at 75:25 this year, in favor of domestic sources. Next year, the mix will be adjusted to 80:20, in favor of domestic borrowings.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, likewise said the decline in debt payments was due to a “more manageable burden of principal and interest payments relative to the country’s export earnings and income from services.”

“This suggests that the Philippines has been strategically managing its external debt portfolio to optimize repayment schedules and reduce near-term pressures,” he said in a Viber message.

Latest data from the BSP showed that the debt service burden as a share of gross domestic product (GDP) stood at 3.2% in the second quarter. This was lower than 3.6% a year earlier.

Earlier data from the central bank showed outstanding external debt hit a record $130.182 billion at the end of June. Broken down, this was composed of $79.825 billion in public debt and $50.357 billion in private debt.

This brought the external debt-to-GDP ratio to 28.9% at end-June.

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.