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Debt Ratios Remain at Comfortable Levels in Q3 2012


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 as of end-September 2012, up by US$493 million (or 0.8 percent) from the US$61.2 billion level in the second quarter as a result of: net availments (excess of drawdowns over repayments of US$734 million); and foreign exchange revaluation adjustments (US$528 million, due largely to the weakening of the U.S. Dollar against the Japanese Yen), which were partially offset by an increase in residents’ investments in Philippine debt papers (US$747 million).

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

On a year-on-year basis, however, the debt stock dropped by US$707 million inspite of net availments of US$ 1.1 billion mainly due to: higher resident investments in Philippine debt papers (US$1.5 billion); and downward foreign exchange revaluation adjustments (US$250 million).

External Debt Ratios

“Major external debt indicators remained strong in the third quarter”, the Governor continued. Gross international reserves (GIR) stood at US$82.0 billion in September 2012, or a cover of 10.3 times for short-term (ST) debt under the original maturity concept, and 7.2 times under the remaining maturity concept, (the latter 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 starting October 2012.] 

The external debt ratio (a solvency indicator), or outstanding debt expressed as a percentage of aggregate output (gross national income or GNI ) sustained its improving trend, declining further to 19.4 percent from 19.7 percent in June 2012 and 21.5 percent in September 2011.  The same trend is observed using GDP1 as denominator as a result of the continued strong growth in GDP, the fastest in the ASEAN region for the third quarter.

The external debt service ratio , (or principal and interest payments expressed as a percentage of exports of goods and receipts from services and income) is a measure of the sufficiency of foreign exchange to meet maturing obligations.  The ratio likewise improved to 7.3 percent by end September from 7.9 percent a quarter ago due to higher foreign exchange receipts and lower debt payments. The ratio has consistently remained well below the 20 to 25 percent international benchmark, indicating a strong liquidity position relative to maturing obligations.

Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in tenor and represented 87.1 percent of total.  [MLT loans are those with maturities longer than one (1) year.]  The larger share of MLT accounts means that the amount of scheduled debt payments are spread out over a longer period of time.

The weighted average maturity for all MLT accounts stood at 20.6 years, with public sector borrowings having a longer average (22.2 years) compared to the private sector (10.9 years). 

Short term external debt comprised the 12.9 percent balance of debt stock, and consisted largely of trade credits and bank borrowings.

Public sector external debt declined from US$47.1 billion to US$46.7 billion in June 2012 due to increased holdings by residents of public sector debt papers (US$730 million) as well as net repayments (US$225 million), mainly by the National Government.  In contrast, private sector external debt grew from US$14.1 billion to US$15.0 billion, mainly due to net loan availments by both banks and non-banks (US$960 million).

The creditor profile remained unchanged: official creditors (consisting of multilateral and bilateral funders) had the largest share at 43.1 percent of total, followed by foreign holders of bonds and notes (36.1 percent), foreign banks and other financial institutions (14.0 percent); the balance (6.8 percent) consisted mostly of foreign suppliers/exporters.

The currency composition of external debt was essentially the same: U.S. dollar-denominated accounts comprised 48.3 percent of total, Japanese Yen obligations 26.1 percent, and multi-currency loans from the Asian Development Bank and the World Bank 11.8 percent; the rest of the accounts (13.8 percent) were denominated in 18 other currencies.

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