PH net external liabilities down 16.2 percent

By Lee C. Chipongian

The country’s net external liability position as of end-June dropped by 16.2 percent to $28.4 billion from end-March of $33.9 billion, the Bangko Sentral ng Pilipinas (BSP) said, citing revaluation adjustments.

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As of end-June, total financial liabilities amounted to $198.2 billion from $205.87 billion end-March, while total financial assets stood at $169.85 billion from $172 billion, translating to an international investment position (IIP) of $28.4 billion. The IIP summarizes the country’s stock of financial claims and complements the reporting of balance of payments which also summarizes economic transactions with the rest of the world for certain periods.

The BSP said the negative revaluation adjustments “more than offset the continued inflows of foreign direct investments to the economy during the quarter.” The 1.3 percent quarter-on-quarter drop in the external financial assets, in the meantime, is affected by the $3 billion decline in the BSP’s reserves.

The lower net liability position was on account of the growth in external financial assets from direct and portfolio investment inflows, and the decline in external financial liabilities because of negative revaluation adjustments.

“The country’s external financial liabilities… declined due mainly to the revaluation adjustments, particularly in direct and portfolio equity instruments,” the BSP said. The revaluation adjustments “mirrored” the stock market’s 9.9 percent quarter-on-quarter decline during the period, and also reflected the weakened peso vis-à-vis the US dollar. “(The) continued depreciation of the peso against the US dollar contributed partly to the decrease in financial liabilities, as peso-denominated instruments posted lower US dollar equivalents,” said the BSP.

The BSP is still the sole net lender of resources to the rest of the world. The independent financial institution accounted for $77.7 billion of the country’s financial assets. About 99.8 percent are official reserve assets or the gross international reserves. The “Other Sectors” accounted for the second largest share of the country’s external financial assets at 38.7 percent or $65.7 billion, while banks held the remaining 15.6 percent or $26.5 billion.

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Around 45.6 percent of external financial assets are central bank reserve assets. The rest are direct investments such as debt instruments and equity capital.

As for total external financial liabilities, majority are by “Other Sectors” followed by the General Government’s total outstanding external liabilities to the rest of world and banks’ liabilities.

 The BSP said that by instruments, the country’s external financial liabilities were composed largely of direct and portfolio investments such as non-residents’ investments in equity capital, equity securities, debt instruments and debt securities, and other investments including loans to residents.