Philippines’ debt service burden surges by 210% in early 2023

The Philippines is grappling with a significant increase in its debt service burden, according to data from the Bangko Sentral ng Pilipinas (BSP).

In the first two months of 2023, the country’s debt service burden surged by 210 percent, reaching $2.14 billion. This is a substantial leap from the $691 million recorded during the same period last year.

The spike in the debt service burden can be attributed to a substantial rise in principal payments, which skyrocketed by 466.50 percent to $1.17 billion. Both the public and private sectors made significant efforts to prepay or repay foreign currency loans, resulting in this remarkable surge in principal payments.

In comparison, principal payments stood at a mere $206 million in 2022.

Alongside the surge in principal payments, interest payments on these loans also experienced a notable increase. Rising by 100.8 percent, interest payments reached $974 million, up from $485 million during the corresponding period in the previous year.

Principal external debt service primarily comprises fixed medium to long-term credits, while interest payments are associated with fixed and revolving short-term credits of both banks and non-banks.

The debt service burden encompasses both principal and interest payments subsequent to rescheduling. It encompasses various financial obligations, including credits from the International Monetary Fund, loans covered by the Paris Club, commercial banks’ rescheduling, and new money facilities.

However, it does not include prepayments of future years’ maturities of foreign loans, as well as principal payments on fixed and revolving short-term liabilities of banks and non-banks.

As of the end of 2022, the Philippines’ total outstanding external debt increased by 4.5 percent to $111.27 billion. Of this amount, the public sector accounted for $67.4 billion, while the private sector’s debt totaled $43.9 billion.