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External Debt Rises, Debt Ratios Improve in Fourth Quarter 2007


Outstanding Philippine external debt approved and/or registered by the Bangko Sentral ng Pilipinas stood at US$54.9 billion as of end-December 2007.  The level reflected an increase of US$511 million (0.9 percent) from US$54.4 billion as of end-September 2007.  Year-on-year, the country’s external debt rose by US$1.6 billion (2.9 percent) from US$53.4 billion as of end-2006.

Major External Debt Ratios Improve

Despite the increase in the country’s external debt, major external debt ratios continued to improve due to the higher levels of aggregate output, foreign exchange receipts and international reserves.

The country’s external debt ratio for 2007, or the percentage of outstanding external debt to aggregate output or GNP 1 , improved to 34.9 percent, from 36.8 percent in September and 41.7 percent in 2006.  In terms of GDP1, the external debt ratio also improved to 38.1 percent, from 40.3 percent in September and 45.4 percent in 2006. The declining ratio indicates the country’s improving capacity to service its maturing foreign obligations.

The external debt service ratio (DSR), or the percentage of total principal and interest payments to total exports of goods and receipts from services and income, was estimated at 9.6 percent in 2007, an improvement of 2.2 percentage points from the 11.8 percent recorded last year.  The DSR has thus remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service obligations maturing during the current period.

Gross international reserves (GIR), which stood at US$33.8 billion as of end-December 2007, represented 4.8 times (from 4.6 times at end-2006) the level of short-term debt based on the original maturity concept, and 2.9 times (from 2.4 times) the level of short-term debt based on the remaining maturity concept. Short-term accounts under the remaining maturity concept include obligations with original maturities of one year or less plus amortizations on medium and long-term accounts falling due within the next 12 months, i.e., from January to December 2008. The same ratios would reach 5.1 times and 3.1 times, respectively, using the higher GIR of US$36.1 billion as of end-February 2008.

Please refer to the attached table for the time series data from 2000.

Changes in External Debt Stock

The growth in the debt stock during the fourth quarter resulted from increased holdings of Philippine debt papers by non-residents (US$539 million).  Net principal repayments of foreign liabilities (US$439 million) were largely offset by upward foreign exchange revaluation adjustments (US$395 million) due to the continued weakening of the U.S. dollar against other currencies in which the debt stock is denominated.

Year-on-year, the debt stock rose by US$1.6 billion driven by upward FX revaluation adjustment of nearly US$1.1 billion and net loan availments of US$765 million.  Increased holdings of Philippine debt papers by residents (US$273 million) partially tempered the increase.  Local branches of foreign banks and private local banks both posted net increases in their foreign liabilities (US$681 million and US$243 million, respectively) principally reflecting the growth in their total foreign exchange deposit liabilities to
non-residents by more than US$504 million.

Prepayments during the whole of 2007 totaled US$1.2 billion, of which US$1.0 billion pertained to obligations maturing in 2008 and beyond.

External Debt Profile

The maturity profile of the country’s external debt remained predominantly medium to long term, accounting for 87.1 percent of the total. These loans, with original tenors of more than one year, had a weighted average maturity of 18.9 years, slightly longer than 18.7 years last September and 17.8 years in December last year. Public sector borrowings had an average term of 21.4 years, more than twice the private sector’s 9.9 years. Short-term external debt represented 12.9 percent of total.

Total consolidated public sector external debt rose to US$37.7 billion, from last quarter’s US$37.2 billion with share to total slightly increasing to 68.6 percent, from 68.4 percent.

Private sector external debt rose to US$17.3 billion, from US$17.2 billion in September but share to total declined to 31.4 percent, from 31.6 percent.

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 39.0 percent of the country’s total external debt, followed by foreign holders of bonds and notes at 33.8 percent, and foreign banks and other financial institutions, 19.1 percent. The rest of the creditors (8.1 percent) were mostly foreign suppliers.

More than half of the debt stock (51.8 percent) was denominated in U.S. dollars and about a quarter (25.2 percent) in Japanese yen.  Multi-currency loans from the Asian Development Bank and the World Bank comprised 9.4 percent, and the rest (13.6 percent) were in 16 other currencies.

Based on annual/annualized GNP/GDP

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