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Debt Ratios Remain at Comfortable Levels in 2011


Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. reported that the country’s outstanding external debt approved/registered by the BSP stood at US$61.7 billion at end-2011, lower by US$720 million compared to the US$62.4 billion recorded in the third quarter. The debt stock declined due largely to net repayments by both public and private sector borrowers and negative foreign exchange revaluation adjustments as the U.S. dollar recovered against other currencies, particularly the Japanese Yen in the last quarter of the year.

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 grew by US$1.7 billion (or 2.8 percent) from the 2010 level of US$60.0 billion due to the following: (a) positive foreign exchange revaluation adjustments (US$800 million) due to the general weakening of the U.S. dollar, particularly in the third quarter of the year; (b) net availments
(US$473 million); (c) increased investments by non-residents in Philippine debt papers (US$340 million); and (d) audit adjustments (US$50 million).

External Debt Ratios

"Major external debt indicators remained at comfortable levels by the close of 2011”, the Governor observed. Gross international reserves (GIR) which amounted to US$75.3 billion at year-end represented cover for short-term debt of 10.7 times (under the original maturity concept) and 7.5 times (under the remaining maturity concept).  The ratio under the remaining maturity concept is substantially higher than the international benchmark of 1.0.  [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 2012.] 

The external debt ratio or outstanding external debt as a percentage of aggregate output (gross national income or GNI) improved from 22.6 percent last year to 20.9 percent in 2011. Using gross domestic product (GDP), the ratio still showed an improvement from 30.1 percent in 2010 to 27.5 percent in 2011.  The ratio is an indicator of solvency and reflects the country’s capacity to repay long-term foreign obligations.

The external debt service ratio (DSR), or the ratio of total principal and interest payments relative to total exports of goods and receipts from services and income, is a measure of the sufficiency of foreign exchange to meet currently maturing obligations.  In 2011, the ratio slightly increased to 8.9 percent from 8.7 percent the previous year due to a decline in export receipts as global demand slowed down due to the Euro zone and U.S. crisis. The ratio, however, is still well below the 20 to 25 percent international benchmark, indicating a strong liquidity position vis-à-vis payment obligations. 

Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in tenor, with MLT accounts representing 88.6 percent of total.  [MLT loans 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 stood at 22.5 years.  Public sector borrowings had a longer average tenor of 24.3 years, compared to 11.2 years for the private sector. 

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

Total public sector external debt slightly declined to US$47.6 billion in the fourth quarter from US$47.9 billion in September, due to net repayments and negative foreign exchange revaluation adjustments.  Similarly, private sector external debt was down to US$14.1 billion or by US$474 million due to net repayment by banks.

The creditor profile remained unchanged.  Borrowings from official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest share at 44.1 percent of total; most of these loans carry “softer” or more concessional terms.   Foreign holders of bonds and notes comprised 36.6 percent of total, followed by foreign banks and other financial institutions at 12.5 percent. The rest of the creditors (6.8 percent) were mainly foreign suppliers/exporters. 

The currency composition of external debt was likewise essentially maintained: U.S. dollar-denominated accounts represented 47.4 percent of total; Japanese Yen accounts, 27.1 percent; and multi-currency loans from the Asian Development Bank and the World Bank, 11.5 percent.  The rest of the accounts comprising the 14.0 percent balance were denominated in 18 other currencies.

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