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Foreign debt inches up but still ‘prudent’ — BSP

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THE COUNTRY’S outstanding external debt edged up last quarter from the preceding three months, but has remained manageable, the Bangko Sentral ng Pilipinas (BSP) said in a Sept. 13 media release e-mailed on Sunday.

Outstanding foreign debt grew one percent to $81.3 billion in the second quarter from $80.4 billion as of end-March, largely due to non-residents’ investments in Philippine debt papers issued offshore worth $1.2 billion, and foreign exchange revaluation amounting to $405 million.

“Net repayments amounting to $650 million and prior periods’ adjustments of $133 million partially offset the uptick in the debt stock,” the central bank said.

External debt refers to all kinds of loans clinched by Philippine residents from non-residents.

Sought for comment, Rizal Commercial Banking Corp. economist Michael L. Ricafort attributed the rise in the second quarter from the first quarter to diversification of borrowings. “The national government diversified its funding/borrowing sources to include more foreign borrowings vis-a-vis local borrowings and also more diversified foreign borrowings other than the US dollar, especially in currencies with lower interest rates/borrowing costs such as the euro, Japanese yen and Chinese yuan, as well as to be more active in those foreign debt markets/sources every few years,” he said in an e-mail.

At the same time, the BSP said key foreign debt indicators have remained at prudent levels, with debt service ratio — principal and interest payments (or debt service burden) in relation to export of goods and receipts from services and primary income that is a measure of adequacy of the country’s foreign exchange earnings to pay for maturing obligations — steadied at 7.5% as of end-June from a year ago.




The same comparative six-month periods saw the ratio debt service burden to gross domestic product ease to 2.7% from 2.8%. “The ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long term,” the BSP explained.

As of end June, foreign debt with maturities longer than 12 months accounted for 80%, while those falling due within a year made up 19.2%. The weighted average of medium- and long-term debt steadied at 16.8 years in the second quarter, with government borrowings having a lnoger average term of 20.8 years compared to 7.7 years for the private sector. “This means that foreign exchange requirements of debt payments are well spread out and, thus, more manageable,” the BSP said in its statement.

COMPONENTS
Government sector borrowing widened to $42.3 billion last quarter from $40.2 billion in the year’s first three months. “About $35.2 billion (83.3%) of public sector obligations were national government borrowings while the remaining $7 billion pertained to other government agencies’ loans,” the BASP said.

Private sector debt dipped to $39 billion at end-June from $40.3 billion at end-March, with share to total similarly declining to 48% from 50.1%, “due largely to the reduction in bank liabilities.”

Last quarter saw Japan as the top creditor country with $15.1 billion worth of loans to the Philippines, followed by the United States of America ($4 billion), the Netherlands ($3.2 billion) and United Kingdom ($3 billion).

The country’s foreign debt stock remained denominated largely in US dollars (59.5%) and yen ( 13%). — Luz Wendy T. Noble

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