United States dollar banknotes and an American flag displayed on a laptop screen are seen in this illustration photo taken in Poland on Dec. 26, 2022. — JAKUB PORZYCKI/NURPHOTO VIA CONNECT

THE PHILIPPINES’ external debt hit a record $118.833 billion at end-September, the Bangko Sentral ng Pilipinas (BSP) said.

Preliminary data from the BSP showed external debt increased by 10.1% from $107.91 billion in the same period a year ago. It also inched up by 0.8% from $117.9 billion as of end-June.

External debt includes all types of borrowings by residents from nonresidents.

“The rise in the debt level was due to prior periods’ adjustments (i.e., borrowings made in previous quarters) amounting to $2 billion, of which $1.9 billion were borrowings by private sector nonbank firms,” the BSP said.

The central bank said that the rise in the external debt stock was also tempered by “negative foreign exchange revaluation of $655 million; the sale of Philippine debt papers to residents by nonresidents of $220 million; and net repayments of $200 million.”

The year-on-year increase was due to net availment worth $6 billion, mainly due to borrowings by the National Government (NG).

Higher external debt was also due to the “change in the scope of the external debt to include nonresidents’ holdings of peso-denominated debt securities issued onshore reported in the first quarter of 2023 ($3.3 billion); prior periods’ adjustments of $1.5 billion; and positive foreign exchange revaluation of $291 million.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the increase in external debt was due to NG borrowings.

“Most of the increases in external debt in recent months, especially since the start of 2023, largely due to higher NG borrowings to diversify funding sources amid the need to hedge versus rising global interest rates since 2022,” he said in a Viber message.

This brought the external debt ratio, or the external debt as a percentage of gross domestic product (GDP), to 28.1%. This is slightly lower than 28.5% in the previous quarter, mainly due to improved Philippine GDP in the third quarter.

“The external debt-to-GDP ratio of the country at 20% levels in recent years could still be considered relatively lower compared to other Asian countries, as a matter of prudence and learning from the lessons related to foreign exchange risks entailed on external borrowing during past crisis periods,” Mr. Ricafort added.

The debt service ratio, or principal and interest payments as a fraction of export receipts and primary income, jumped to 10.3% at the end of the third quarter from 4.8% in the same period a year ago.

The BSP said this was due to higher principal and interest payments this year.

Meanwhile, public sector debt slipped by 1% to $73.7 billion as of end-September from $74.5 billion in the previous quarter.

BSP data showed that the bulk or 91.1% of the total debt was from National Government borrowings, while the remainder came from government-owned and -controlled corporations, government financial institutions and the BSP.

Borrowings by the private sector rose by 3.9% to $45.1 billion as of the end of the third quarter from $43.4 billion in end-June.

“The rise in the debt level was driven mainly by prior periods’ adjustments of $1.9 billion arising from the late registration application/reporting of borrowings by various private sector borrowers; and the sale of debt securities by residents to nonresidents of $231 million,” the BSP added.

At end-September, the Philippines’ top creditor countries were Japan ($14.8 billion), the United Kingdom ($4.1 billion) and Singapore ($3.3 billion).

Loans from multilateral ($32.1 billion) and bilateral sources ($13.4 billion) accounted for 38.3% of all external borrowings.

This was followed by bonds ($38.8 billion or 32.7%) and foreign banks and other financial institutions ($26.7 billion or 22.5%), while the rest ($7.8 billion or 6.6%) were owed to suppliers and foreign exporters.

Data from the Bureau of the Treasury (BTr) last week showed that the NG’s debt service bill nearly doubled to P77.76 billion in October from P39.817 billion a year ago.

In the 10-month period, the NG’s debt service bill rose by an annual 59% to P1.478 trillion.

Interest payments accounted for more than three-fourths or 75.9% of the total debt payments during October.

In October, interest payments surged by 77.7% to P58.983 billion from P33.185 billion in the same month in 2022.

Broken down, interest on local debt climbed by 76.8% to P39.619 billion, while interest on foreign debt jumped by 79.7% to P19.364 billion.

Meanwhile, principal payments almost tripled (183%) to P18.777 billion from P6.632 billion a year ago.

Amortization on foreign obligations surged by 193% to P16.835 billion while domestic debt payments more than doubled to P1.942 billion. — Luisa Maria Jacinta C. Jocson