By Lee C. Chipongian

The Philippines’ external debt service burden fell by 4.6 percent as of end-October, 2017 to $5.839 billion compared to $6.121 billion same time in 2016 despite the weaker peso.

Based on Bangko Sentral ng Pilipinas (BSP) numbers, principal payments decreased by 4.13 percent to $3.76 billion from $3.922 billion. Interest payments were also lower by 5.45 percent to $2.079 billion versus the previous year’s $2.199 billion.

The debt service burden continues to indicate that both the public and private sectors have enough foreign exchange for its maturing obligations. By computing the debt service ratio with debt service burden, foreign debt borrowers show a capacity to settle maturing debt, according to the BSP.

The latest external debt data – which was end-September, 2017 since foreign debt is reported quarterly – show that the country’s outstanding foreign currency debt stood at $72.4 billion.

This was lower by 5.6 percent or $4.3 billion compared to same time in 2016 of $76.6 billion.

The central bank said the peso depreciation encouraged borrowers to turn to domestic financing to minimize exposure to exchange rate volatility.

In October last year, the peso averaged at P51.34:$1. It was the second highest monthly average in 2017 after hitting its weakest point of P51.79 (October 30, 2017).

The BSP said the country’s debt service ratio is still on the solid side back up by external reserves of above $81 billion during the period.

The debt service ratio at 19.5 percent remains below the international benchmark range of 20 percent to 25 percent. The debt service ratio is a solvency indicator.

The public sector external debt for the January-September, 2017 period reached $37.2 billion and it accounted for 51.4 percent of total debt.

This was slightly lower than the end-June 2017’s $37.5 billion. About $30.4 billion or 81.6 percent of public sector obligations are National Government borrowings.

Private sector debt, in the meantime, accounted for 48.6 percent of the total amounting to $35.1 billion, just a little more than last quarter’s $35 billion.