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Debt Ratios Remain at Comfortable Levels in First Quarter of 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$60.9 billion as of end-March 2011, reflecting an increase of US$900 million (1.5 percent) from the US$60.0 billion level as of end-2010. This resulted from new borrowings by both the public and private sectors (US$1.8 billion) which were partly offset by increased resident investments (US$1.0 billion) in Philippine debt papers issued abroad, mostly by Philippine public sector borrowers.

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 external debt stock grew by US$4.0 billion (or 7.0 percent) due to the following: (a) net availments of nearly US$3.4 billion by both public and private sectors borrowers; and (b) foreign exchange revaluation adjustments of US$2.2 billion due to the general weakening of the US dollar against most major currencies. The impact of these factors were partially mitigated by the higher investments by residents in Philippine bonds and notes issued abroad of US$1.8 billion.

External Debt Ratios

"Major external debt indicators remained at comfortable levels during the first quarter", the Governor continued. With gross international reserves (GIR) at US$66.0 billion as of March 2011, the GIR ratio to short-term debt was at 9.7 percent under the original maturity concept and 6.6 percent under the remaining maturity concept, much higher than the international benchmark of 1.0. Short-term 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 April 2011 to March 2012. 

The external debt ratio or outstanding external debt as a percentage of gross national income improved to 22.2 percent from 24.4 percent a year ago. Using gross domestic product (GDP1 ), the ratio also improved to 29.5 percent from 32.5 percent last year.

The external debt service ratio (DSR) or the percentage of total principal and interest payments to exports of goods and receipts from services and income further improved from 10.3 percent in March 2010 to 8.3 percent2  this year, 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 tenor, with share to total debt at 88.9 percent.  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 22.6 years.  Public sector borrowings had a longer average tenor of 24.4 years, compared to 11.7 years for the private sector.

Short term external debt represented 11.1 percent of the debt stock, and consisted largely of trade credits and inter-bank borrowings.

Public sector external debt slightly rose to US$46.5 billion in the first quarter from US$46.2 billion in December 2010 due to net availments (US$1.3 billion) whose impact was nearly fully offset by increased investments by residents in Philippine bonds and notes issued abroad (US$1.1 billion).  Private sector external debt was similarly on the rise, reaching US$14.4 billion from US$13.9 billion in December 2010, mainly due to increased bank borrowings, as well as a decline in residents' investments in international debt papers issued by private banks.

The creditor profile also remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 43.6 percent of total, followed by foreign holders of bonds and notes, 37.0 percent, and foreign banks and other financial institutions, 12.9 percent. The rest of the creditors (6.5 percent) were mainly foreign suppliers/exporters.

The currency composition of external debt was likewise essentially unchanged: US Dollar-denominated accounts represented 47.2 percent of total; Japanese Yen-denominated accounts, 28.1 percent; and multi-currency loans from the Asian Development Bank and the World Bank, 10.2 percent.  The rest of the accounts comprising the 14.5 percent balance was denominated in 18 other currencies.


1 Based on annual/annualized GNI/GDP

2 Based on annual Debt Service Burden and Exports of Goods and Receipts from Services and Income

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