The Philippines’ outstanding external debt went up by 9.5 percent or $10.226 billion to $117.918 billion as of end-June versus $107.692 billion same time last year, based on the latest central bank data.

The external debt data released by the Bangko Sentral ng Pilipinas (BSP) cover borrowings of Philippine residents and non-resident creditors, regardless of sector, maturity, creditor type, debt instruments or currency denomination. The BSP gathers data on external debt through reports submitted by borrowers to the BSP and the reports of major foreign creditors.

The BSP said that based on the latest data, the National Government (NG) borrowed $7.8 billion during the period while non-residents’ holdings of peso-denominated debt securities issued onshore totaled $3.7 billion.

Total net availments amounted to $7.8 billion, said the BSP, with prior periods’ adjustments of $312 million.

However, it also noted that the transfer of some $1.3 billion domestic debt papers issued offshore from non-residents to residents and negative foreign exchange (FX) revaluation of $295 million has “partially tempered the year-on-year increase in the debt stock” as of end-June. A negative FX revaluation means reduction in US dollar borrowings on account of the rate of the greenback.

On a quarterly basis, the central bank reported that external debt slightly dipped 0.8 percent or by $894 million from its end-March tally of $118.8 billion.

The BSP attributed the lower debt level in the second quarter from the impact of the US dollar appreciation against other currencies in reaction to continued US Federal Reserve policy rate tightening.

It further noted that this “reduced the US dollar equivalent of borrowings denominated in other currencies (negative FX revaluation)” by $963 million while the sale of Philippine debt papers by non-residents to residents also decreased the debt stock by $305 million, offseting prior periods’ adjustments of $264 million and net availments of $110 million.

Meanwhile, the outstanding external debt of $117.918 billion is equivalent to 28.5 percent of the country’s gross domestic product (GDP), higher from same time last year of 26.8 percent.

As of end-June, public sector external debt declined by $686 million to $74.5 billion in the second quarter of 2023 from the previous quarter’s $75.2 billion.

Public sector external debt’s share to total slightly dropped to 63.2 percent from 63.3 percent in the first quarter, said the BSP. About 90.9 percent or $67.7 billion of public sector obligations were NG borrowings, while the remaining $6.8 billion were borrowings of government-owned and controlled corporations, government financial institutions and the BSP.

Private sector debt also decreased in the second quarter by $208 million to $43.4 billion from $43.6 billion end-March. Its share to total increased a bit from 36.7 percent to 36.8 percent due net repayments of $630 million and negative FX revaluation of $67 million. This was offset by prior periods’ adjustments which totaled $263 million and the sale of debt papers by residents to non-residents of $226 million.

Despite that for the past three years, the external debt stock has exceeded the country’s gross international reserves (GIR), the BSP said there is enough FX to pay for maturing loans.

As of end-August, the GIR is at $99.8 billion. In end-June, the GIR stood at $99.4 billion which at the time, with $117.918 billion in debt stock, is good enough to cover short-term debt 5.7 times based on the original maturity concept.

As for the debt service ratio (DSR), this increased to 11 percent from 4.6 percent same period last year due to higher repayments in the second quarter of 2023. The DSR relates principal and interest payments or debt service burden to exports of goods and receipts from services and primary income.

The BSP said the DSR and the GIR cover for short term debt both indicate that the country still has adequate FX resources to meet maturing obligations.

As of end-June, the external debt’s maturity profile was still predominantly medium- and long-term (MLT) or with original maturities longer than one year.

About 85.3 percent or $100.6 billion are MLT loans and the weighted average maturity for all MLT accounts remained at 17.3 years, with public sector borrowings having a longer average term of 20.1 years compared to 7.2 years for the private sector.

Short-term accounts or those with original maturities of up to one year accounted for 14.7 percent of total debt stock such as bank liabilities, trade credits and others.

The BSP said 57.2 percent or $57.5 billion of MLT accounts have fixed interest rates while 41.2 percent or $41.4 billion have variable rates. The rest or 1.7 percent or $1.7 billion are non-interest bearing.

As of end-June, the country’s major creditors are still Japan with $13.3 billion of external debt, followed by the US with $4.1 billion and the United Kingdom with $3.7 billion.

Meanwhile, loans from official sources or multilateral loans worth $32 billion and $12.6 billion from bilateral creditors accounted for 37.9 percent of total debt stock.

Other borrowings are in the form of bonds and notes worth $40.7 billion which was 34.5 percent of the total, and obligations to foreign banks and other financial institutions worth $25 billion or 21.2 percent of the total. The rest at $7.5 billion or 6.4 percent of the total were owed to other creditors, mainly suppliers and exporters.