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Debt Indicators Remain at Comfortable Levels in Second Quarter of 2014

09.22.2014

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. announced that outstanding Philippine external debt approved/registered by the BSP stood at US$58.1 billion as of end-June 2014, reflecting a decrease of US$236 million (or  0.4 percent) from the US$58.3 billion level as of end-March 2014. The decline resulted mainly from repayments exceeding new borrowings by US$593 million; and previous periods’ adjustments due to late reporting of transactions and audit findings (negative US$262 million).  The effects of these developments were, however, partially offset by increased investments by non-residents in Philippine debt papers (US$354 million); and foreign exchange (FX) revaluation adjustments (US$266 million) arising from the weakening of the US Dollar, particularly against the Japanese Yen and the Philippine Peso.

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

Year-on-year, external liabilities rose slightly by US$96 million as non-residents increased their investments in Philippine bonds and notes issued abroad by US$646 million; the full impact of this was partly offset by downward FX revaluation adjustments (US$315 million); previous periods’ adjustments (negative US$140 million); and net repayments (US$94 million).

External Debt Ratios

“Major external debt indicators remained at comfortable levels at the end of the second quarter”, the Governor continued. Gross international reserves (GIR) of US$80.7 billion as of June 2014 represented cover for short-term debt of 8.4 times under the original maturity concept.

The external debt ratio or outstanding external debt expressed as a percentage of gross national income (GNI) improved to 17.6 percent from 17.9 percent in March 2014 and 18.3 percent a year ago.  The trend is the same using gross domestic product as denominator, with the gradual recovery of the US economy, favorable domestic business sentiment, and robust inflows of overseas Filipino remittances. 

The external debt service ratio (DSR) or total principal and interest payments as a percentage of exports of goods, receipts from services and primary income, likewise further improved from 7.2 percent in March 2014 and 8.1 percent a year ago to 6.8 percent1. The ratio has consistently remained at single digit levels since 2010 indicating sustained improvement in the country’s capacity to service maturing obligations.

Debt Profile

The external debt portfolio remained predominantly medium- to long-term (MLT) in tenor, with MLT accounts’ share to total debt at 83.5 percent.  [MLT accounts are those with maturities longer than one (1) year.]  The larger share of MLT accounts means that funding requirements for debt payments are more manageable since payment due dates are spread out over a longer period of time.

The weighted average maturity for all MLT accounts stood at 19.9 years.  Accounts of the public sector had a longer average tenor of 22.1 years, compared to 9.2 years for the private sector.

Short-term external debt comprised the 16.5 percent balance of the debt stock, and were largely trade credits, inter-bank borrowings and deposit liabilities.

Public sector external debt slightly rose to US$41.0 billion from US$40.8 billion in March 2014 due to: (a) increased non-residents’ holdings of public sector debt papers (US$329 million); and (b) FX revaluation adjustments (US$233 million) on debts denominated in third currencies.  These factors were partially offset by net repayments (US$205 million) and prior periods’ adjustments due to late reporting (negative US$143 million).

In contrast, private sector debt declined to US$17.1 billion from US$17.6 billion due to net repayments of US$388 million, mainly for bank liabilities.

 The creditor profile remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 36.9 percent of total, closely followed by foreign holders of bonds and notes at 36.8 percent.  The share of foreign banks and other financial institutions stood at 17.7 percent, while the 8.6 percent balance pertained mainly to foreign suppliers/exporters.

The currency composition of external debt continued to be mainly in two (2) major currencies – the US Dollar (52.4 percent) and Japanese Yen (19.3 percent). Multi-currency loans from the Asian Development Bank and the World Bank comprised 12.6 percent of total, while the rest of the accounts (15.7 percent) were denominated in 18 other currencies.

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1 Based on annual/annualized Debt Service Burden and Exports of Goods and Receipts from Services and Income

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