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Debt Ratios Remain at Comfortable Levels in 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$60.3 billion at end-2012, lower by US$1.4 billion compared to the US$61.7 billion level recorded in the third quarter. The debt stock declined due largely to negative foreign exchange revaluation adjustments as the U.S. dollar recovered particularly against 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 dropped by US$104 million (or 0.2 percent) from the 2011 level of US$60.4 billion due to the following: (a) increased investments by residents in Philippine debt papers (US$1.4 billion) and (b) negative foreign exchange revaluation adjustment (US$1.4 billion) due to the strengthening of the U.S. dollar against the Japanese Yen, which were offset by (c) net availments (US$2.6 billion) and (d) positive audit adjustments (US$59 million).

External Debt Ratios

“Major external debt indicators remained at comfortable levels by the close of 2012”, the Governor observed. Gross international reserves (GIR) which amounted to US$83.8 billion at year-end represented cover for short-term debt of 9.9 times (under the original maturity concept) and 7.1 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 2013.] 

The external debt ratio or outstanding external debt as a percentage of aggregate output (gross national income or GNI) indicated sustained improvement from 20.3 percent last year to 18.3 percent in 2012. Using gross domestic product (GDP) as denominator, the same trend is observed (from 26.9 percent in 2011 to 24.1 percent in 2012) as the country registered rapid economic growth of 6.6 percent for the full year despite a weak global economy in 2012. 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 2012, the ratio improved further to 7.4 percent from 10.2 percent the previous year due to higher receipts as the country posted the highest annual growth in merchandise exports in East and Southeast Asia (according to the National Economic Development Authority) and lower debt payments. The ratio, however, is still well below the 20 to 25 percent international benchmark, indicating a strong liquidity position vis-à-vis payment obligations.  Data on exports of goods and receipts from services and income are now in line with the International Monetary Fund’s 6th edition of Balance of Payments and International Investment Position Manual.

Debt Profile

The external debt portfolio remained predominantly medium to long-term (MLT) in tenor, with MLT accounts representing 85.9 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 20.4 years.  Public sector borrowings had a longer average tenor of 22.0 years, compared to 10.7 years for the private sector. 

Short term external debt comprised the 14.1 percent balance of debt stock, and consisted largely of trade credits and inter-bank borrowings.

Total public sector external debt declined to US$45.2 billion in the fourth quarter of 2012 from US$46.7 billion in September of the same year, due to negative foreign exchange revaluation adjustments for debts denominated particularly in Japanese Yen (US$1.5 billion).  On the other hand, private sector external debt slightly increased to US$15.2 billion or by US$125 million.

The creditor profile remained unchanged.  Borrowings from official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest share at 42.1 percent of total; most of these loans carry “softer” or more concessional terms.   Foreign holders of bonds and notes comprised 36.2 percent of total, followed by foreign banks and other financial institutions at 14.9 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 48.7 percent of total; Japanese Yen accounts, 23.8 percent; and multi-currency loans from the Asian Development Bank and the World Bank, 12.6 percent.  The rest of the accounts comprising the 14.9 percent balance were denominated in 18 other currencies.

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