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External Debt Indicators Continue to Improve in First Quarter

06.28.2007

Outstanding Philippine external debt approved and/or registered by the Bangko Sentral ng Pilipinas stood at US$54.0 billion as of end-March 2007, up by US$679 million or 1.3 percent from US$53.4 billion as of end-2006.  The expansion may be attributed to the seasonal increase in National Government borrowings during the first quarter, which this year resulted in a net inflow of US$1.6 billion, partially offset only by net repayments by the private sector. Year-on-year, the debt stock declined by US$1.3 billion or 2.3 percent from the end-March 2006 level of US$55.3 billion mainly due to net principal payments including prepayments of US$3.1 billion, of which US$2.5 billion pertained to future years’ maturities.

Other External Debt Indicators

Despite the moderate growth in debt stock during the quarter, other major external debt indicators showed continued improvements. Gross international reserves, which rose to US$24.7 billion as of end-March 2007, represented 4.8 times the level of short-term debt based on the original maturity concept, and 2.4 times the level of short-term debt based on the remaining maturity concept. Short-term accounts under the remaining maturity concept include not only loans with original maturities of one year or less but also amortizations on medium and long-term (MLT) accounts falling due within the next 12 months, i.e., from April 2007 to March 2008. The same ratios would reach 5.0 times and 2.5 times, respectively, using the GIR of US$25.6 billion as of end-May.

For the first quarter, the external debt service ratio (DSR), or the percentage of the country’s total principal and interest payments to total exports of goods and receipts from services and income was estimated at 12.1 percent.  Using annualized data, the DSR for the 12-month period ending March 2007 was 11.8 percent, reflecting a downward trend from the ratio’s peak of 17.1 percent in 2002 and its 12.0 percent level in 2006.  The country’s DSR has remained well below the 20 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to pay loans maturing during the current period.

The external debt ratio, or outstanding external debt as a percentage of aggregate output or GNP , declined to 40.6 percent, a marked improvement of 1.1 and 9.0 percentage points, from end-2006 and end-March 2006, respectively.  In terms of GDP, the external debt ratio also improved to 44.2 percent, or by 1.2 and 9.5 percentage points from the quarter- and year-ago levels, respectively.

The maturity profile of the country’s external debt remained favorable, with MLT loans accounting for 90.5 percent of the total as of end-March 2007. These loans, with original tenors of more than one year, had a weighted average maturity of 18.1 years, slightly longer than last year’s 17.6 years. Public sector borrowings had an average term of 20.7 years, more than double the private sector’s 9.3 years.

Consolidated public sector external debt amounted to US$38.3 billion, an increase of 3.4 percent during the quarter, with share to total increasing to 70.9 percent, from 69.5 percent in December.  In contrast, private sector debt declined by 3.5 percent to US$15.7 billion and accounted for 29.1 percent of total debt.

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 39.1 percent of the country’s total external debt, followed by foreign holders of bonds and notes at 35.8 percent, and foreign banks and other financial institutions, 18.5 percent. The rest of the creditors (6.6 percent) were mostly foreign suppliers.

More than half of the debt stock (53.4 percent) was denominated in U.S. dollars and a quarter (25.0 percent) was denominated in Japanese yen.  Multi-currency loans from the Asian Development Bank and the World Bank comprised 9.7 percent and the rest (11.9 percent) were in 16 other currencies.

Please refer to the attached table for details.

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