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Debt Ratios Remain at Comfortable Levels in Q3 2013


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$59.1 billion as of end-September 2013.  The more than US$1.0 billion (or 1.8 percent) increase from the US$58.0 billion level in the second quarter was largely attributed to: (a) increase in non-residents’ investments in Philippine debt papers (US$509 million); (b) net availments (US$342 million); (c) positive foreign exchange (FX) revaluation adjustments (US$113 million); and (d) previous periods’ adjustments (US$81 million).  On a year-on-year basis, however, the debt stock dropped by US$2.7 billion (or 4.3 percent) from the end-September 2012 level of US$61.7 billion due largely to the negative foreign exchange revaluation adjustments (US$3.6 billion). 

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

External Debt Ratios

“Major external debt indicators remained at prudent levels in the third quarter of 2013”, the Governor continued.  Gross international reserves (GIR) stood at US$83.5 billion as of 30 September 2013 and represented 8.4 times the level of short-term (ST) debt under the original maturity concept and 6.5 times under the remaining maturity concept.  The ratio under the remaining maturity concept is much 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 October 2013 to  September 2014.] 

The external debt ratio (a solvency indicator) or total outstanding debt (EDT) expressed as a percentage of annual aggregate output (GNI) slightly increased to 18.4 percent from the 18.3 percent in the previous quarter; but a substantial improvement was noted in the ratio if compared with the 21.4 percent level a year ago.  The same trend is observed when using GDP as denominator.  During the third quarter, the economy grew by 7.0 percent, a little lower than the 7.5 percent growth posted in June 2013; nonetheless, this is the fifth consecutive quarter that growth is at least 7.0 percent.   

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 (XGSI), remained at 7.6 percent in the third quarter but a substantial improvement in the ratio was noted from the 8.3 percent level a year ago.  The ratio, which measures sufficiency of foreign exchange available to meet currently maturing obligations, has remained well below the 20.0 to 25.0 percent international benchmark, attesting to the country’s strong liquidity position. 

Debt Profile

The debt portfolio remained heavily leaning towards medium- to long-term (MLT) maturities, accounting for 83.2 percent of total outstanding external liabilities.  These are scheduled to be paid over a longer time horizon, translating to more manageable levels of foreign exchange requirements for loan servicing.
The weighted average maturity for all MLT accounts stood at 20.1 years with public sector borrowings having a longer average tenor of 22.1 years compared to 9.8 years for the private sector. 

Short-term external debt accounted for the 16.8 percent balance of debt stock, and consisted largely of trade credits and bank borrowings.

Total public sector debt totaled US$42.2 billion as of end-September 2013, higher than the US$42.0 billion level in the previous quarter due to increase in non-resident investments in Philippine debt papers as well as upward foreign exchange revaluation adjustments.  Private sector debt likewise grew from US$16.1 billion to US$16.9 billion due to net availments.

The creditor profile was largely unchanged: official creditors (consisting of multilateral and bilateral creditors) continued to have the largest exposure at 38.0 percent of total debt, followed by foreign holders of bonds/notes at 36.7 percent, and foreign banks and other financial institutions at 17.9 percent.  The rest of the creditors pertained mostly to foreign suppliers/exporters. 

In terms of currency mix, the country’s foreign debt was essentially unchanged, with U.S. dollar-denominated accounts comprising 51.2 percent, followed by the Japanese Yen – 20.2 percent, multi-currency loans from the World Bank and the Asian Development Bank - 12.0 percent, and 18 other currencies – 16.6 percent.

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