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Debt Ratios Sustain Improvements in 2010

03.31.2011


Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. reported that outstanding Philippine external debt approved/registered by the BSP stood at US$60.0 billion by the end of 2010, reflecting a slight increase (US$0.28 billion) over the US$59.8 billion recorded in the third quarter. This was attributed mainly to foreign exchange revaluation adjustments in view of the appreciation of the Japanese yen against the U.S. dollar which pushed up debt levels in US Dollar terms.

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

Year-on-year, the debt stock increased by US$5.2 billion (or 9.5 percent) compared to the 2009 level of US$54.9 billion due to the following: (a) net availments of more than US$4.0 billion of both the public and private sectors; and (b) upward foreign exchange revaluation adjustments of US$1.8 billion, whose impact were partially mitigated by increased investments of residents in Philippine bonds and notes issued offshore (US$0.77 billion).

External Debt Ratios

"Major external debt indicators continued to improve during the fourth quarter", the Governor observed. Gross international reserves (GIR) amounted to US$62.4 billion at the end of the year, which further improved the GIR to short-term (ST) debt ratio under both the original and remaining maturity concepts. [ST accounts under the remaining maturity concept consist of 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 2011.] With the higher GIR, reserves are now equivalent to 9.9 times the level of ST debt based on original maturity and 5.9 times under the remaining maturity concept; the 5.9 ratio is substantially higher than the international benchmark of 1.0. 

The external debt ratio or outstanding external debt as a percentage of aggregate output (gross national product or GNP1) improved from 29.7 percent last year to 27.8 percent in 2010. Using gross domestic product (GDP1 ), the ratio also improved from 34.0 percent as of end-2009 to 31.8 percent as of end-2010.
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, likewise improved from 10.4 percent in 2009 to 8.8 percent2 in 2010, and 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 year.

Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in nature, with MLT accounts representing 89.5 percent of total.  [MLT accounts are those with maturities longer than one (1) year.]  The larger share of MLT accounts 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 22.4 years.  Public sector borrowings had longer average tenor of 24.2 years, compared to 11.7 years for the private sector.

Short term external debt represented 10.5 percent of the debt stock, and consisted largely of trade credits and inter-bank borrowings.

Total public sector external debt declined slightly to US$46.2 billion in the fourth quarter from US$46.4 billion in September, primarily due to increased investments by residents in Philippine bonds and notes issued abroad.  Private sector external debt, on the other hand, grew by US$469 million to US$13.9 billion due to increased bank borrowings.

The creditor profile also remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 44.6 percent of total, followed by foreign holders of bonds and notes, 36.4 percent, and foreign banks and other financial institutions, 12.0 percent. The rest of the creditors [seven (7.0) percent] were mainly foreign suppliers/exporters.

The currency composition of external debt was likewise essentially unchanged: US Dollar-denominated accounts represented 47.8 percent of total; Japanese Yen-denominated accounts, 29.3 percent; and multi-currency loans from the Asian Development Bank and the World Bank, 10.5 percent.  The rest of the accounts comprising the 12.4 percent balance were denominated in
18 other currencies.

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

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