Foreign debt service bill up sharply at end of October

Foreign debt service bill up sharply at end of October

THE debt service bill for foreign obligations rose 132.8% in the 10 months to October, the Bangko Sentral ng Pilipinas (BSP) reported.

Citing preliminary data, the BSP said the debt service bill on external borrowing was $11.938 billion during the period.

At the end of October, debt service was equivalent to 3.5% of gross domestic product (GDP), against 1.6% a year earlier.

Debt service is the amount a country needs in order to remain up to date on foreign debt payments. It includes both principal and interest payments.

The BSP said principal payments rose 113.9% to $6.258 billion in the 10 months.

Interest payments stood at $5.68 billion, up 157.8%.

The principal component was mostly fixed medium- to long-term credit, while interest payments consisted mainly of fixed and revolving short-term credit from banks and nonbanks.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the growth in debt service was due to high interest rates and elevated inflation.

“Furthermore, increased foreign borrowing, both from commercial and multilateral and government sources amid the need to diversify borrowings also fundamentally increased the foreign debt service bill,” Mr. Ricafort added.

The BSP estimates outstanding external debt to have risen 10.1% to $118.833 billion at the end of September.

External debt refers to all types of borrowings by Philippine residents from nonresidents, following the residency criterion for international statistics.

The external debt ratio, or the external debt as a percentage of GDP, was equivalent to 28.1% of GDP.

Separately, the Department of Finance announced that the Bureau of the Treasury (BTr) will be launching a retail Treasury bond (RTB) offer within the first quarter.

“The RTBs encourage ordinary Filipinos to start investing in safe and stable sources of passive income, while promoting financial inclusion,” it said in a statement last week.

“To further this agenda, the BTr is looking to engage more digital finance platforms, allowing the BTr to reach a wider investor base,” it added.

The department said that the BTr is also eyeing global bond offerings for its external financing program this year to diversify its funding sources.

“The BTr is exploring a potential curtain-raiser offering in the first semester of the year,” it added.

Former Finance Secretary Benjamin E. Diokno said that the government is planning to raise around $5 billion from the issuance of foreign bonds this year.

The government’s borrowing program is set at P2.46 trillion this year, of which P606.85 billion will come from external sources.

In 2023, the government raised $3 billion from dollar bonds in January; $1.26 billion from a retail dollar bond offering in October; and $1 billion from its inaugural Sukuk bond issue, which was settled in December.

The government borrows from domestic and external sources to help fund a budget deficit capped at 5.1% of GDP this year. — Luisa Maria Jacinta C. Jocson