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External Debt Declines in 2009

03.31.2010

Bangko Sentral ng Pilipinas (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$53.3 billion at end-December 2009, lower by US$601 million, or 1.1 percent, from US$53.9 billion in December 2008.  The debt stock declined as net inflows from non-bank public sector borrowers were negated by net repayments of banks including BSP and other private sector borrowers.  Increased resident investments in Philippine debt papers issued abroad as well as downward foreign exchange revaluation adjustments also contributed in offsetting the impact of new borrowings on the debt stock.

On a quarterly basis, however, the debt stock increased by US$120 million or 0.2 percent, from the US$53.1 billion recorded in September 2009. 

External debt refers to all types of borrowings by Philippine residents from non-residents that were approved/registered by the BSP.

External Debt Ratios Sustain Prudent Levels

“Major external debt indicators remained at prudent levels by the end of the year”, the Governor continued. Gross international reserves (GIR) reached US$44.2 billion at year-end and represented 11.1 times the level of short-term external debt based on original maturity, substantially better than the 8.4 and 5.4 ratios recorded in September 2009 and December 2008, respectively. Under the remaining maturity concept, the ratio likewise improved to 5.2 times the level of short-term external debt, from the 4.4 and 3.4 ratios in September 2009 and December 2008, 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 (1) year or less, plus amortizations on medium and long-term accounts falling due within the next 12 months, i.e., from January to December 2010.

The external debt ratio, or outstanding external debt as a percentage of aggregate output or Gross National Product (GNP) was estimated at 29.2 percent for December 2009 from 29.0 percent a year ago. Using Gross Domestic Product (GDP), the external debt ratio was calculated at 33.1 percent or 0.8 percentage points higher than in the previous year, largely as a result of exchange rate movements.

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 10.4 percent for the year, slightly higher than the 9.7 percent recorded in 2008 due to the decline in foreign exchange receipts brought about by the global economic slowdown. The DSR, however, remains 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.

Maturity Mix Further Improves, Creditor and Currency Profiles Remain Stable

The external debt portfolio remained predominantly medium to long-term (MLT), with share to total rising further from 87.0 percent in 2008 to 92.5 percent in 2009; short-term accounts dropped to 7.5 percent from 13.0 percent a year ago.

MLT accounts refer to loans with maturities longer than one year; thus, a larger share of MLT accounts to the total portfolio means that loan payments are spread out over a longer period of time, resulting in a more manageable level of debt payments.

The weighted average maturity for all MLT accounts was 20.2 years.  Public sector borrowings had longer average tenors of 21.7 years, compared to 11.8 years for the private sector.

Total public sector external debt increased by US$1.5 billion to US$41.8 billion, primarily due to net new borrowings obtained to finance development projects and other requirements of government.  The full impact of these borrowings was tempered by an increase in resident investments in Philippine debt papers of the public sector issued abroad.  

Private sector external debt declined to US$11.4 billion from US$13.5 billion last year as repayments by both bank and non-bank borrowers exceeded loan availments.

The creditor profile was largely unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 45.7 percent of total, followed by foreign holders of bonds and notes at 36.6 percent, and foreign banks and other financial institutions, 12.2 percent. The rest of the creditors were mostly foreign suppliers/exporters.

The currency composition of external debt remained essentially denominated in US Dollars (49.2 percent); Japanese Yen (28.6 percent); and multi-currency loans from the Asian Development Bank and the World Bank, (12.0 percent). The rest of the accounts were denominated in 18 other currencies.

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