OUTSTANDING external debt rose 1.1% quarter-on-quarter at the end of 2019, according to the Bangko Sentral ng Pilipinas (BSP), with debt levels remaining within prudent levels by government norms.
In a statement, the central bank said outstanding foreign debt rose to $83.6 billion at the end of last year, from $82.7 billion at the end of September.
“The rise in the debt stock during the fourth quarter was brought about by the increase in non-residents’ investments in Philippine debt papers issued offshore of $507 million. The upbeat investor sentiment was reflected in the generally narrower bond spreads due to positive external developments such as the initial trade deals between the US and China at the latter part of the year,” the BSP said.
Net availments of $317 million, mainly due to oil imports, and prior periods’ adjustments of $150 million added to the rise in the debt stock. These were partially offset the revaluation of foreign debt held in foreign currency, worth $29 million.
The debt stock also grew 5.9% year-on-year due to $3.7 billion in net availments, prior-period adjustments of $954 million, and currency revaluation adjustments of $170 million.
“This upward impact on the debt stock was partially offset by the transfer of Philippine debt papers from non-residents to residents,” the BSP said.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said that the slight uptick is a positive development given the global trade environment at the end of 2019.
“The general appetite of investors was upbeat about the Philippines’ 2020 economic growth prospects with the passage into law of the 2020 national budget,” he said in an e-mail.
“The debt profile remains manageable and the ratio is competitive compared to neighbors in the region,” he added.
The 2020 budget was approved in early January while the 2019 budget’s validity was extended to make up for its delayed passage last year.
The BSP said key external debt indicators remained at prudent levels despite the rise in external debt. It noted that the debt service ratio — which refers to the principal and interest payments (or debt service burden) is a proportion of export of goods and services receipts and primary income — improved to 6.5% from the 6.6% seen a year ago.
Foreign debt with tenors longer than one year accounted for 79.4% of total external debt. Those that have a tenor of one year or less comprised 20.6% of the balance, consisting mainly of bank liabilities, trade credits, and others.
The weighted average maturity for medium- and long-term (MLT) accounts was 16.7 years, down from 17.1 years in the previous quarter. The BSP noted that public-sector borrowing has an average term of 20.9 years compared to 7.4 year for the private sector.
“This means that FX (foreign exchange) requirements for debt payments are well spread out and, thus, more manageable,” the central bank said.
Borrowing by the government rose to $42.8 billion at the end of December from $42.5 billion at the end of September.
“About $36 billion of public sector obligations were national government (NG) borrowings while the remaining $6.7 billion pertained to loans of government-owned and controlled corporations, government financial institutions and the BSP,” it said.
Debt taken on by the private sector rose to $40.8 billion from $40.2 billion at the end of the third quarter following net availments worth $372 million.
In the fourth quarter, Japan ($8.1 billion) was the country’s biggest creditor, followed by China ($685 million), and Singapore ($439 million).
Some 59% of the debt stock was dollar-denominated (59%) followed by yen debt (13.9%). — Luz Wendy T. Noble