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External Debt Increases by 2.5 Percent in Third Quarter of 2009

12.29.2009

BSP Governor Amando M. Tetangco, Jr. reported that the country’s outstanding external debt approved/registered by the Bangko Sentral ng Pilipinas stood at US$53.1 billion at end-September 2009, up by nearly US$1.3 billion or 2.5 percent from the US$51.8 billion level in June 2009.  On a year-on-year basis, however, the debt stock declined by US$347 million or 0.6 percent from US$53.5 billion in September 2008.

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

“Major external debt indicators remained at prudent levels by the end of the third quarter”, the Governor continued. Gross international reserves (GIR) reached US$42.5 billion at end-September and represented 8.4 times the level of short-term external debt based on original maturity, a substantial improvement from the 4.4 and 6.9 ratios recorded in September 2008 and June 2009, respectively. Under the remaining maturity concept, the ratio likewise improved to 4.4 times the level of short-term external debt, from 3.0 and 3.9 in September 2008 and June 2009, respectively, due to higher reserves and lower short-term obligations.  Short-term  (ST) accounts under the remaining maturity 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 October 2009 to September 2010.

The external debt ratio, or outstanding external debt as a percentage of aggregate output or Gross National Product (GNP1 ) was estimated at 29.9 percent for September 2009 from 28.9 percent a year ago. Using Gross Domestic Product (GDP1), the external debt ratio was calculated at 33.9 percent, or 2.0 percentage points higher than in the previous year as the global crisis dampened Philippine exports.

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 10.7 percent 2  for the 12-month period ending September 2009, slightly higher than the 10.6 percent a quarter ago due mainly to the decline in foreign exchange receipts brought about by the global economic slowdown. However, the DSR has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period.

Changes in External Debt Stock

The overall expansion in the debt stock was caused mainly by the accounting adjustment due to the appreciation of third currencies against the US Dollar (US$1.2 billion). The currency of reporting for Philippine external debt statistics is the US Dollar, and the debt stock is revalued using exchange rates as of end of the report quarter.

Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in nature, with MLT accounts representing 90.4 percent of total.  As MLT accounts are those with maturities longer than one year, the larger share of MLT accounts to the total means that loan payments are spread out over a longer period of time, resulting in a more manageable level of debt servicing.

The weighted average maturity for all MLT accounts was 20.1 years.  Public sector borrowings had longer average tenors of 21.8 years, compared to 11.6 years for the private sector. Short term external debt accounted for less than 10 percent of the debt stock, and consisted largely of inter-bank borrowings and trade-related obligations.

Total public sector external debt increased to nearly US$41.0 billion, due to upward foreign exchange revaluation adjustments of US$1.1 billion on non-US Dollar-denominated accounts arising from the weakening of the US Dollar.

Private sector external debt declined to US$12.2 billion from US$12.5 billion in June as loan repayments by corporate borrowers continued to exceed new loan availments.

The creditor profile also remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 45.6 percent of total, followed by foreign holders of bonds and notes with 34.7 percent, and foreign banks and other financial institutions,
13.5 percent. The rest of the creditors were mostly foreign suppliers/exporters.

The currency composition of external debt was likewise essentially unchanged: US Dollar-denominated accounts represented 49.5 percent of total; Japanese Yen-denominated accounts, 29.4 percent; multi-currency loans from the Asian Development Bank and the World Bank, 10.9 percent; and the rest of the accounts comprising the 10.2 percent balance were denominated in 18 other currencies.

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1 Based on annualized GNP/GDP
2 Based on annualized Debt Service Burden and Exports of Goods and Receipts from Services and Income

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