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External Debt Increases; Debt Ratios Remain Prudent in First Quarter of 2010


BSP Officer-In-Charge Diwa C. Guinigundo reported that the country’s outstanding external debt approved/registered by the Bangko Sentral ng Pilipinas (BSP) stood at US$55.4 billion at end-March 2010, up by nearly US$2.2 billion or 4.1 percent from the US$53.3 billion level as of end-2009.  The growth resulted from net borrowings of both the private (US$1.5 billion) and public (US$925 million) sectors.

On a year-on-year basis, the debt stock grew by US$2.9 billion or 5.6 percent from US$52.5 billion in March 2009.

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

Major External Debt Ratios

“Major external debt indicators remained at prudent levels by the end of the first quarter”, the Officer-In-Charge continued. Gross international reserves (GIR) reached US$45.6 billion at end-March 2010.  The higher level of short-term (ST) debt caused a decline to 8.7 times of the GIR to ST external debt ratio based on original maturity, from the 11.1 times recorded at end-2009, but much higher than the 6.0 times recorded a year ago. Under the remaining maturity concept, the ratio showed the same trend, decreasing to 4.7 times the level of short-term external debt from 5.2 times at end-2009, but higher than the 3.4 times last year.  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 April 2010 to March 2011.

The external debt ratio, or outstanding external debt as a percentage of aggregate output or Gross National Product (GNP1 ) remained at 28.8 percent. Using Gross Domestic Product (GDP1 ), the external debt ratio was estimated at 33.2 percent, slightly higher than in the previous year due to the increase in debt stock.

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 10.3 percent2  for the 12-month period ending

March 2010, an improvement from the 10.4 percent at end-2009 and March 2009. 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.
Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in nature, with MLT accounts representing 90.6 percent of total.  MLT accounts are those with maturities longer than one (1) year and 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 payments.

The weighted average maturity for all MLT accounts was 20.0 years.  Public sector borrowings had longer average tenors of 21.5 years, compared to 11.9 years for the private sector.

Short term external debt accounted for less than 10 percent of the debt stock, and consisted largely of trade-related obligations and inter-bank borrowings.

Total public sector external debt increased to US$42.6 billion, higher by US$768 million from end-2009’s US$41.8 billion, primarily due to net new borrowings of US$925 million.  The National Government incurred net new borrowings of US$1.1 billion.

Private sector external debt substantially grew by US$1.4 billion to US$12.8 billion, due to net loan availments of US$1.5 billion.

The creditor profile also remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 43.5 percent of total, followed by foreign holders of bonds and notes with 37.2 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 51.3 percent of total; Japanese Yen-denominated accounts, 29.4 percent; multi-currency loans from the Asian Development Bank and the World Bank, 11.2 percent; and the rest of the accounts comprising the 8.2 percent balance were denominated in 18 other currencies.


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

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