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External Debt Indicators Continue to Improve in 3rd Quarter

12.29.2006

Outstanding Philippine external debt approved and/or registered by the Bangko Sentral ng Pilipinas stood at US$54.1 billion as of end-September 2006, up by US$0.2 billion (0.3 percent) from US$53.9 billion in June. On a year-on-year basis, the debt stock declined by more than US$1.4 billion (2.6 percent) from US$55.5 billion in September 2005, mainly due to net loan repayments, including prepayments of US$1.8 billion.

External Debt Indicators

Despite the slight increase in external debt in the third quarter, the other major external debt indicators continued to improve. Gross international reserves (GIR), which reached a record high at US$22.49 billion at end-November, represented almost 4.0 times the level of short-term debt based on the original maturity concept, and 1.9 times the level of short-term debt based on the remaining maturity concept. Short-term accounts under the remaining maturity concept consist of loans with original maturities of one year or less plus amortizations on medum and long-term (MLT) accounts falling due within the next 12 months from end-September 2006.

The external debt service ratio or the percentage of the country’s total principal and interest payments to total exports of goods and receipts from services and income, further improved to 11.4 percent in September, from 11.6 percent in June and 14.1 percent a year ago.  The ratio, which has remained well below the 20 percent international benchmark, indicates that the country has sufficient foreign exchange earnings to service current maturities of its foreign obligations.

The external debt ratio, or outstanding external debt as a percentage of aggregate output or GNP for the 12-month period ending September 2006, declined to 44.5 percent, or an improvement of 2 and 9.7 percentage points compared to the corresponding figures posted in June and the year ago. In terms of GDP, the external debt ratio likewise was estimated at 48.6 percent, down 2.1 and 10 percentage points from June and year-ago levels, respectively.

Factors Behind Increase in Debt

Gross MLT loan availments amounted to US$2.3 billion while repayments amounted to US$2.5 billion, of which US$545 million represented prepayments of future years’ maturities. Overall negative foreign exchange revaluation adjustment on third currency-denominated liabilities due to the weakening of certain currencies, particularly the Yen, vis-à-vis the U.S. dollar further reduced the debt stock by US$208 million.  However,   the net increase in bank borrowings, primarily by OBUs and branches of foreign banks; and the reduction in residents’ holdings of Philippine debt papers issued abroad increased the debt stock by US$452 million and US$115 million, respectively.

The maturity profile of the country’s external debt remained favorable with MLT loans accounting for 89.5 percent of the total. These loans, with original tenors of more than one year, had a weighted average maturity of 17.9 years. Public sector borrowings had a longer average term of 20.4 years, compared to 9.4 years for the private sector.

Consolidated public sector external debt rose by US$346 million during the quarter, with share to total similarly increasing to 69.6 percent in September from 69.1 percent in June.  Private sector debt, on the other hand, declined by US$193 million with share to total consequently falling to 30.5 percent in September from 30.9 percent in June.

Official creditors (consisting of multilateral institutions, such as the Asian Development Bank and the World Bank, and bilateral creditors mainly the Japan Bank for International Cooperation) accounted for 37.9 percent of total debt, followed by foreign holders of bonds and notes at 35.6 percent, and foreign banks and other financial institutions, 19.9 percent. The rest of the creditors (6.6 percent) were mostly foreign suppliers.

Please refer to attached table for details.

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