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Foreign debt at six-year low in 2016




Posted on March 20, 2017


THE COUNTRY’s foreign debt declined in 2016 to a six-year low, the Bangko Sentral ng Pilipinas (BSP) said, as the Philippines settled more of its offshore borrowings and as the stronger dollar pulled the gross amount down from a year ago.

'Key external debt indicators remained at comfortable levels at the close of 2016.' -- BSP Governor Amando M. Tetangco, Jr.
External debt amounted to $74.763 billion last year, dropping from the $76.6 billion incurred at end-September and 3.5% less than the $77.474 billion posted in 2015, the central bank said in a statement over the weekend.

The figure is also the lowest since the $73.594-billion offshore liabilities recorded in 2010.

The debt stock combines all foreign currency-denominated borrowings held by Philippine residents, companies and the national government.

The lower debt came as the government and private firms settled $3.4 billion in principal payments, coupled with adjustments made for the immediately preceding period’s tally that resulted in a reduction of $168 million, the BSP said.

Foreign exchange movements also pulled the debt stock lower by $36 million due to revaluation, as the US dollar picked up strength versus Asian currencies. About 65.1% of the country’s external debt is in US dollar, while 12% are denominated in yen.

The peso touched fresh eight-year lows during the last three months of 2016, as the local unit depreciated by 4.19% on average versus the greenback for the full year.

The drop in debt stock was capped by a $846-million increase in non-resident investments in Philippine debt papers sold abroad.

With the lower debt stock, its share to the local economy also plunged to nearly a fourth. External debt was equivalent to 24.6% of gross domestic product (GDP) from 26.5% in 2015, the lowest ratio in at least a decade according to central bank data.

Philippine GDP expanded by 6.8% last year, close to the high end of the government’s 6-7% target for 2016.

“Key external debt indicators remained at comfortable levels at the close of 2016,” BSP Governor Amando M. Tetangco, Jr. was quoted as saying in the statement, noting that the central bank remains armed with more than enough buffers.

Gross international reserves amounted to $80.692 billion last year, which can settle 5.6 times the total short-term borrowings totaling $14.526 billion. Short-term debt -- which mature in less than a year -- consists of bank borrowings, deposit liabilities, intercompany accounts for foreign bank branches and trade credits.

Meanwhile, 80.6% of the country’s foreign obligations are under medium- to long-term accounts, which are deemed “more manageable” for the Philippines since the repayment may be spread out, the BSP said. On average, these loans will mature in 16.9 years.

Debts held by government carry a longer average term at 22.9 years and account for half of the total at $37.5 billion, the BSP said.

Loans booked by the private sector also declined to $37.29 billion, with an average maturity for long-term contracts at 7.9 years.

By source, credit lines from foreign banks covered 34.5% of total offshore debt, while loans from multilateral and bilateral institutions -- which are used to fund local development projects -- made up 30.6%, the central bank added.

About 29.3% consisted of obligations to foreigners with investments in Treasury notes, while 5.6% is owed to suppliers and exporters overseas.

The Philippine government relies on borrowings from both local and external sources to help fund its budget deficit and support a growing economy. The Bureau of the Treasury raised $500 million in new money during its offer of 25-year offshore bonds in January, which will be used to help finance state projects under the Duterte administration. The Treasury has been holding weekly auctions since the year opened, as it aims to raise up to P180 billion this quarter. -- Melissa Luz T. Lopez