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Outstanding External Debt Drops Further in Q1 2014

06.20.2014

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$58.3 billion at end-March 2014, down by US$165 million (or 0.3 percent) from the US$58.5 billion level at the close of 2013.  This resulted from net repayments mainly on liabilities of banks (US$833 million) which were partially offset by: (a) an increase in non-resident investments in Philippine debt papers issued offshore (US$417 million); (b) foreign exchange (FX) revaluation adjustments (US$169 million) as the US Dollar (the reporting currency for debt) weakened, particularly against the Japanese Yen; and (c) adjustment to previous periods’ transactions (US$81 million).

Compared to the same period last year, the debt stock likewise declined by US$705 million (or 1.2 percent) from US$59.0 million due to negative FX revaluation adjustments (US$1.3 billion).  Other factors namely: (a) higher non-resident investments in Philippine debt papers (US$412 million); (b) net availments (US$97 million); and (c) adjustment to previous periods’ transactions (US$93 million) reduced the downward impact of the exchange revaluation on the debt level.

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

External Debt Ratios

“Key external debt indicators remained at prudent levels in the first quarter of the year”, the Governor continued.  Gross international reserves (GIR) which stood at US$79.6 billion as of end March 2014 represented 7.6 times cover for short-term (ST) debt under the original maturity concept.

The external debt ratio or outstanding external debt as a percentage of aggregate output (gross national income or GNI) reflected sustained improvement, declining to 17.9 percent from 19.1 percent a year ago. The same trend is observed using gross domestic product (GDP), with the ratio down to 21.5 percent in
March 2014 from 22.8 percent last year as the Philippine economy continued to grow.

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 primary income (XGSI), further improved to 6.5 percent in March 2014 from 8.0 percent in 2013 due to higher FX receipts and lower payments during the 12-month period.  The DSR has continued to be well below the international benchmark range of 20.0 to 25.0 percent, attesting to the country’s strong liquidity position.

Debt Profile

The country’s external obligations remained predominantly medium to long-term (MLT) in nature, and comprised 81.9 percent of total. The larger share of MLT accounts means that scheduled debt payments are spread out over a longer period of time, correspondingly easing cash requirements to meet maturing obligations.

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 9.6 years for the private sector. 

Short-term external debt comprised the 18.1 percent balance of debt stock, and consisted largely of trade credits and bank borrowings.

Total public sector debt rose to US$40.8 billion in the first quarter of 2014 from US$40.5 billion level in December 2013, due to: a) increased non-resident investments in public sector debt papers (US$386 million); (b) FX revaluation adjustments (US$185 million) due to the weaker US Dollar; and (c) adjustments to prior years’ transactions (US$25 million); these were, however, partially offset by net repayments (US$367 million).

In contrast, private sector debt declined from US$18.0 billion to US$17.6 billion due to net repayments mainly for bank liabilities.

The creditor profile was essentially unchanged: official creditors (consisting of multilateral and bilateral creditors) continued to have the largest exposure at 37.4 percent of total debt, followed by foreign holders of bonds/notes (35.9 percent), foreign banks and other financial institutions (18.3 percent) and foreign suppliers/exporters (8.4 percent). 

The currency composition of external debt remained largely in two major currencies: the US Dollar (52.9 percent) and the Japanese Yen (19.3 percent). The rest are US Dollar-denominated multi-currency loans from the World Bank and the Asian Development Bank (12.4 percent) and loans in 18 other currencies (15.4 percent).

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