Philippines' external debt up 8.3% to $128.7 B

The Philippines’ total outstanding external debt as of end-March 2024 amounted to $128.692 billion, 8.3 percent higher compared to same period last year of $118.812 billion on the back of higher borrowings by the government and private sector, majority of which are bank loans for liquidity purposes.

Based on Bangko Sentral ng Pilipinas (BSP) data, on a quarterly basis, the external debt increased by 2.6 percent or $3.298 billion from $125.394 billion end-December 2023.

According to the BSP, “despite the increase in the debt stock, the external debt ratio (EDT expressed as a percentage of gross domestic product) remains at prudent levels, recording at 29 percent from 28.7 percent in the last quarter of 2023.”

On a year-on-year basis, debt stock rose by $9.880 billion due mainly to total net availments worth $8.9 billion, of which $5.4 billion are borrowings by private sector entities, mostly banks.

Other factors that raised the external debt are: net acquisition of Philippine debt securities by non-residents of $1.5 billion; and prior years’ adjustments of $1 billion.

Meanwhile, the BSP said the negative $1.6 billion foreign exchange (FX) revaluation of borrowings denominated in other currencies “partially tempered the rise in the debt stock.”

For the first quarter, the central bank noted that the debt level increased because of resident entities’ net availments of $2.5 billion, with the private sector banks raising $2.1 billion in funds from offshore creditors for general corporate expenditures, refinancing of borrowings and liquidity purposes.

Another $331 million net availments by public sector entities were also noted. This was from the National Government (NG) to “fund its various projects/programs which include initiatives to enhance tax system efficiency and foster an enabling environment for digital technology adoption,” said the BSP.

In addition, the BSP said positive investor sentiment also boosted investments in the country’s debt securities by non-residents. This rose by $1.2 billion during the period. There are also prior periods’ adjustments of $551 million.

However, with the US dollar appreciation versus the peso, the negative $927 million FX revaluation of borrowings denominated in other currencies offset the rise in the debt stock.

The BSP said the maturity profile of the country’s external debt as of end-March is still predominantly medium to long term (MLT) in nature or with original maturities longer than one year. The MLT share to total was at 86.7 percent or $111.6 billion.

“Relative to previous quarter, the weighted average maturity for all MLT accounts increased to 16.8 years from 16.7 years, with public sector borrowings having longer average tenor of 20.1 years versus 7.6 years for the private sector,” said the BSP.

Short-term liabilities or those with original maturities of up to one year stood stood at $17.1 billion which is about 13.3 percent of the total external debt. These are mainly: bank liabilities worth $13.1 billion; trade credits of $2.7 billion; and other liabilities amounting to $1.3 billion.

Of the MLT accounts, the BSP said 53.7 percent or $59.9 billion have fixed interest rates; 43.8 percent or $48.9 billion carry variable rates; and 2.5 percent or $2.8 billion are non-interest bearing.

As of end-March, public sector external debt went up by 1.4 percent or $1.1 billion to $78.9 billion from the previous quarter’s $77.8 billion. Its share to total decreased to 61.3 percent from 62.1 percent a quarter ago, said the BSP.

About 91.6 percent or $72.3 billion of public sector obligations are NG borrowings, while the remaining 8.4 percent or $6.6 billion are borrowings by government-owned and controlled corporations, government financial institutions and the BSP.

Private sector debt, on the other hand, increased by 4.7 percent or $2.2 billion to $49.8 billion as of end-March. Its share to total debt stood at 38.7 percent, up from 37.9 percent as of end-December 2023.

Overall, the Philippines’ main creditor countries are still Japan with $15.2 billion; the United Kingdom with $4.6 billion; and the Netherlands with $3.9 billion.

About 39.4 percent of total outstanding external debt or $50.7 billion are loans from official sources such as multilateral and bilateral creditors. Another 32.8 percent or $42.2 billion are borrowings in the form of bonds and notes, and 22.1 percent or $28.5 billion are obligations to foreign banks and other financial institutions. The remaining 5.6 percent or $7.3 billion are owed to other creditors such as suppliers and exporters.