THE PHILIPPINES’ external debt payments more than doubled in January as principal payments surged, central bank data showed.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s external debt service burden soared by 110% to $1.729 billion from $823 million a year ago.
The debt service burden refers to the amount of money a country needs to pay back its foreign creditors.
Principal payments ballooned more than four times to $1.052 billion from $259 million a year earlier.
Interest payments jumped by 20% to $676 million from $564 million a year ago.
As of end-2023, the debt service burden was equivalent to 3.4% of gross domestic product (GDP), up from 2.1% in 2022.
Earlier data from the BSP showed that the country’s outstanding external debt rose to a record $125.4 billion at the end of 2023, higher by 12.7% from $111.3 billion a year earlier.
The external debt-to-GDP ratio stood at 28.7% in 2023. This was higher than 27.5% in the previous year.
“Most of the new global debt issuance in recent years took place in the first month of the year,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In January 2023, the Philippines raised $3 billion from its US dollar bond issuance, the second global bond offering under the Marcos administration.
“Higher inflation and interest rates, especially since 2022, that increased borrowing costs also contributed to the increase in external debt servicing costs,” Mr. Ricafort said.
The BSP kept its benchmark rate steady at a near 17-year high of 6.5% for a fourth straight meeting in April. The central bank raised borrowing costs by 450 basis points from May 2022 to October 2023 to tame inflation.
Inflation accelerated for the first time in five months to 3.4% in February from 2.8% in January. The central bank expects inflation to average 3.8% this year.
“Higher external debt servicing costs in recent months could be attributed to larger budget deficits and foreign borrowings, both commercial and multilateral sources, since the COVID-19 pandemic, as some of these foreign loans mature and also led to higher foreign interest rate costs in recent years,” Mr. Ricafort added.
The National Government borrows from foreign and domestic creditors to finance the budget gap.
The Development Budget Coordination Committee recently revised the budget deficit ceiling this year to P1.48 trillion, equivalent to 5.6% of GDP. This is slightly higher than the previous P1.39-trillion ceiling, equivalent to 5.1% of GDP. — Luisa Maria Jacinta C. Jocson