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Debt Ratios Remain at Comfortable Levels in Third Quarter of 2011


Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. announced that outstanding Philippine external debt approved/registered by the BSP stood at US$62.4 billion as of end-September 2011, reflecting an increase of US$1.0 billion (1.6 percent) from the US$61.4 billion level as of end-June 2011.  While loan transactions for the quarter resulted in net outflows (as loan repayments exceeded loan availments by US$211 million), external debt grew due to the weakening of the US Dollar (the reporting currency for outstanding debt) against the Japanese Yen, thereby increasing the debt figure in US dollar terms by a net amount of US$735 million. The transfer of Philippine debt papers from resident to non-resident investors amounting to US$504 million further increased the debt level.

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

Year-on-year, external liabilities grew by US$2.7 billion (or 4.4 percent) since availments were bigger than repayments by US$2.4 billion, and foreign exchange revaluation adjustments were positive at US$1.6 billion attributed mainly to the  stronger Japanese Yen vis-à-vis the US Dollar. On the other hand, a US$1.4 billion increase in residents’ holdings of Philippine bonds and notes issued abroad during the last 12 months reduced the debt level accordingly.

External Debt Ratios

“Major external debt indicators remained at comfortable levels at the end of the third quarter”, the Governor continued. Gross international reserves (GIR) of US$75.2 billion as of end-September 2011 represented cover for short-term debt of 10.5 times (under the original maturity concept) and 7.3 times (under the remaining maturity concept), which are both 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 October 2011 to September 2012.]

The external debt ratio or outstanding external debt as a percentage of gross national income (GNI1) improved to 21.6 percent from 23.4 percent a year ago. Using gross domestic product (GDP1) as denominator, the debt ratio likewise reflected an improvement from 31.3 percent in 2010 to 28.4 percent this 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 likewise further improved to 8.3 percent2 from 8.8 percent a year ago. The ratio has consistently remained well below the 20 to 25 percent international benchmark range, indicating the sustained improvement in the country’s capacity to service maturing obligations.

Debt Profile

The external debt portfolio remained predominantly medium to long term (MLT) in tenor, with share to total debt at 88.6 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 payments.

The weighted average maturity for all MLT accounts stood at 22.4 years.  Accounts of the public sector had a longer average tenor of 24.2 years, compared to 11.4 years for the private sector.

Short term external debt comprised the 11.4 percent balance of the debt stock; these were largely trade credits and inter-bank borrowings.

Public sector external debt rose to US$47.9 billion (76.7 percent of total) from US$46.9 billion a quarter ago. While net repayments of US$260 million were recorded during the quarter, foreign exchange revaluation adjustments (US$721 million) for non-US Dollar denominated debts and transfers of Philippine debt papers from residents to non-residents (US$501 million) pushed the debt level upward. Private sector external debt amounted to US$14.6 billion, representing 23.3 percent of total debt.

The creditor profile remained essentially unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 43.9 percent of total, followed by foreign holders of bonds and notes, 36.6 percent, and foreign banks and other financial institutions, 13.3 percent. The rest of the creditors (6.2 percent) were mainly foreign suppliers/exporters.

The currency composition of external debt was largely the same, with the bulk denominated in US Dollars (46.5 percent of total) and Japanese Yen (28.6 percent of total). Multi-currency loans from the Asian Development Bank and the World Bank comprised 10.6 percent of total debt, while the rest of the accounts (14.2 percent) were denominated in 18 other currencies.


1 Based on annualized GNI/GDP

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

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