Foreign debt rises to $59.8 billion

Business World

THE COUNTRY’S outstanding foreign debt rose by 9.3% as of end-September, due to more borrowings and upward foreign exchange revaluation, the Bangko Sentral ng Pilipinas (BSP) said in a statement yesterday.

The central bank said that external debt totaled $59.8 billion as of the end of September, $5 billion more than the $54.7 billion recorded in the same period a year ago.

Foreign debt also climbed 4.4% or $2.5 billion from the $57.3 billion the previous quarter.

Total public sector external debt rose to $46.4 billion from $44.2 billion at the end of the second quarter, while private sector foreign debt grew $344 million to $13.4 billion.

External debt covers all types of borrowings made by Philippine residents from nonresidents that were approved and registered with the central bank.

The BSP attributed the increase in the country’s external debt to additional borrowings which exceeded loan repayments by more than $4 billion, as well as a $1.1-billion upward revaluation in foreign exchange.

An increase in investments of residents in Philippine bonds and notes reduced the total debt stock by $269 million.

Despite the increase in foreign debt stock, the central bank said "major external debt indicators remained at prudent levels at the end of the third quarter."

Still manageable

For instance, the central bank noted that 90.4% of external debt consisted of medium- to long-term debt, or those with maturities longer than one year.

The larger share of medium- to long-term accounts in total external debt means that loan payments are spread over a longer period, making debt payments more manageable.

Maturity of medium- to long-term debt averaged 22.4 years.

Public sector borrowings had tenors averaging 24 years, while private sector debt maturity averaged 12.7 years.

The central bank noted further that short-term debt remained below 10% of debt stock and consisted largely of trade credits and inter-bank borrowings.

Moreover, the BSP noted that end-September gross international reserves (GIR) stood at $53.8 billion, making them 9.4 times bigger than short-term external debt, consisting of those with maturity of up to a year, compared to 8.9 times in end-June and 8.4 times a year ago.

The central bank also noted the latest GIR level of $61.3 billion by the end of November can fully cover total outstanding external debt as of end-September.

Debt service ratio (DSR), or the percentage of total principal and interest payments to total exports of goods and services, also improved to 8.9% as of end-September from 9.2% at end-June and 10.7% a year ago.

The central bank noted that DSR remained below the 20%-25% international benchmark. This, it said, means that the country had sufficient foreign exchange earnings to pay maturing short-term foreign debt.

However, external debt to gross domestic product ratio worsened slightly to 33% from 32.9% the preceding quarter, while the ratio to gross national product similarly worsened slightly to 28.7% from 28.6% in the same comparative periods.

In terms of currency composition, 48.5% of total external debt consisted of US dollar-denominated accounts, compared to 29.1% for yen-denominated accounts and 10.6% for multi-currency loans from the Asian Development Bank and the World Bank. The remaining 11.8% were denominated in 18 other currencies.

Creditor profile remained unchanged: multilateral institutions and bilateral creditors accounted for 44.9%; foreign holders of bonds and notes, 36%; foreign banks and other financial institutions, 11.5%; as well as foreign suppliers and exporters, 7.5%.