PH external debt rises to $87.5B

Published September 19, 2020, 5:00 AM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) said that as of end-June this year, the Philippines’ outstanding external debt was higher at $87.453 billion, up by 7.6 percent or $6.2 billion from same time last year of $81.259 billion, as the government borrowed more to finance anti-COVID-19 pandemic programs.

The BSP said the year-on-year increase was due to the following: prior periods’ adjustments amounting to $2.7 billion; transfer of Philippine debt papers from residents to non-residents of $2 billion); net availments worth $1.4 billion; and positive foreign exchange (FX) revaluation of $89 million.

The external debt was 7.4 percent or $6 billion higher compared to the previous quarter’s (end-March) $81.4 billion primarily due to net availments amounting to $2.9 billion and these are mostly National Government (NG) borrowings worth $2.4 billion from the sale of global bonds as well as $3.1 billion loans from multilateral and bilateral creditors for the pandemic response.

The country’s foreign debt also went up because of the following: prior periods’ adjustments of $2.1 billion; increase in non-residents’ investment in Philippine debt papers issued offshore of $839 million; and positive FX revaluation of $227 million as the US dollar “weakened against other currencies, including the peso.”

BSP Governor Benjamin E. Diokno said that since the gross international reserves level rose $93.5 billion by end June and nearing $100 billion by end August, key external debt indicators are considered at prudent levels.

The debt service ratio, which is an indicator of a country’s sufficient stock of FX, is still adequate. From January to June this year, the ratio slightly increased to 7.8 percent from  7.7 percent in 2019.

The total outstanding debt vis-à-vis the GDP also increased to 23.7 percent from 21.4 percent end March. According to the BSP, the current ratio still show “sustained strong position to service foreign borrowings in the medium to long-term (MLT).”

“The country’s external debt to GDP ratio remains one of the lowest compared to other ASEAN member countries,” noted the BSP.

As of end June, public sector external debt was higher at $51 billion from $45.1 billion end-March. “About $44.4 billion of public sector obligations were NG borrowings while the remaining $6.6 billion pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP,” said the central bank.

Private sector debt also rose but only slightly to $36.5 billion from $36.3 billion. Its share to total decreased to 41.7 percent from 44.6 percent previously. The BSP said the increase was because of prior periods’ adjustments of $2.1 billion and net availments of $334 million by private non-banks, which were offset by net repayments of $2.3 billion by private banks.

The maturity profile of the external debt or 87.7 percent is mostly MLT or with original maturities longer than one year. Short term accounts or those with original maturities of up to one year accounted for 12.3 percent of total debt.

“The weighted average maturity for all MLT accounts slightly increased to 17 years, from 16.9 years during the previous quarter, with public sector borrowings having a longer average term of  20.9 years compared to 7.8 years for the private sector. This means that FX requirements for debt payments are well spread out and, thus, more manageable,” said the BSP.