As of end-December 2008, outstanding Philippine external debt stood at US$53.9 billion, up by US$374 million (or 0.7 percent) from the previous quarter’s level of US$53.5 billion. Compared to the end-2007 figure of US$54.9 billion, however, outstanding obligations dropped by US$1.0 billion.
External debt refers to all types of borrowings by Philippine residents from non-residents that were approved/registered by the Bangko Sentral ng Pilipinas (BSP).
Major External Debt Ratios Remain at Prudent Levels
BSP Governor Amando M. Tetangco, Jr. commented that: “Major external debt indicators continued to improve in 2008 due to the country’s substantial foreign exchange receipts, comfortable level of international reserves, and sustained growth in national income.”
“Gross international reserves (GIR) were at a historic high of US$37.6 billion at the close of the year,” the Governor continued. The ratio of GIR to short-term external debt improved to 5.4 in December from 4.4 in September under the original maturity concept, and to 3.4 from 3.0 under the remaining maturity concept. Short-term accounts under the latter concept pertain to 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 2009.
The Governor also cited the further improvement in the external debt service ratio (DSR) which was estimated at 9.6 percent in 2008, from 10.0 percent in the 9-month period ending September and 10.1 percent in 2007. The ratio, which relates total principal and interest payments to exports of goods and receipts from services and income (which include, among others, remittances by overseas Filipino workers), is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing principal and interest payments. It has consistently remained well below the 20 to 25 percent international benchmark.
The external debt ratio, or total outstanding debt expressed as a percentage of the country’s Gross National Product (GNP1/ ), was unchanged at the September 2008 level of 28.9 percent, but was a marked improvement from the 35.0 percent recorded last year. Using Gross Domestic Product (GDP1/ ), the ratio marginally rose to 31.9 from 31.8 percent last September, but was substantially lower than the 38.1 percent in December 2007. The ratio has generally been on a downtrend since 2002 and is currently at its lowest level since 1986 when it peaked at 99.8 percent for debt to GNP and 97.7 percent for debt to GDP. This indicates sustained improvement in the country’s capacity to service maturing foreign obligations.
Please refer to the attached table for the time series data from 2000.
Changes in External Debt Stock
The slight growth in the debt stock during the fourth quarter was due to the large foreign exchange revaluation adjustments for accounts denominated in Japanese yen which strengthened vis-à-vis the U.S. dollar. The currency of reporting for Philippine external debt statistics is the U.S. dollar.
For the year 2008, transactions resulted in net repayments of US$4.3 billion, but the impact of this was substantially offset by upward foreign exchange revaluation adjustments of US$3.2 billion, representing the increase in the U.S. dollar value of yen-denominated obligations due to the yen’s appreciation versus the U.S. dollar. As a result, the debt stock showed a decline of only US$1.0 billion from last year’s US$54.9 billion figure. Without the said upward revaluation adjustments, external debt would have dropped by
US$4.3 billion during the year.
Prepayments during the 12-month period amounted to US$3.4 billion, of which US$864 million were made by the public sector.
External Debt Profile
The maturity mix (medium and long-term or MLT/short-term) of the country’s external debt stood at 87:13 by end-2008 and remained biased towards longer-term accounts. The weighted average maturity for all MLT accounts (with maturities longer than one year) improved from 18.9 years in 2007 to 20.3 years in 2008. Public sector borrowings continued to have longer average tenors of more than 22 years, compared to less than 12 years for private sector accounts. Short-term external debt consisted largely of inter-bank borrowings and trade-related obligations.
Quarter-on-quarter, total public sector external debt rose to US$40.3 billion in December 2008, or by almost US$2.0 billion, primarily as a result of upward revaluation adjustments on yen-denominated debt; share to total debt correspondingly increased from 71.7 percent to 74.9 percent. Again, without foreign exchange revaluation adjustments, the level would have increased by less than US$100 million from the US$38.3 billion recorded in September.
Private sector external debt, on the other hand, dropped to US$13.5 billion from US$15.1 billion in September 2008 as a result of net repayments; share to total debt also declined to 25.1 percent from
28.3 percent a quarter ago.
The creditor profile remained largely unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures, accounting for 45.2 percent of the country’s total external debt, followed by foreign holders of bonds and notes (32.2 percent), and foreign banks and other financial institutions (16.8 percent). The rest of the creditors were mostly foreign suppliers and buyers.
The currency composition of external debt was as follows: U.S. dollar-denominated accounts, 49.7 percent of total; Japanese yen-denominated accounts, 30.4 percent; multi-currency loans from the Asian Development Bank and the World Bank, 9.8 percent; and the rest of the accounts comprising the 10.1 percent balance were denominated in 18 other currencies.
1/ Based on annual GNP/GDP (annualized for September 2008)