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Outstanding Debt Remains at Prudent Levels in Third Quarter of 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$57.7 billion as of end-September 2014, down by US$375 million (or 0.6 percent) from the US$58.1 billion level in June 2014. The decline resulted from negative foreign exchange (FX) revaluation adjustments (US$1.1 billion) as the US Dollar strengthened against most third currencies, particularly the Japanese Yen. The full impact of this development was partly offset by the following: (a) increased investments by non-residents in Philippine debt papers (US$519 million); and (b) net availments (US$237 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, the debt stock was likewise lower (by US$1.3 billion) compared to US$59.1 billion in September 2013.  This was a result of: (a) negative FX revaluation adjustments (US$1.6 billion); (b) excess of repayments over loan drawdowns (US$279 million); and (c) prior periods’ adjustments (negative US$138 million) due to audit findings/late reporting.  The downward effect of these factors on outstanding debt was tempered by the transfer of Philippine debt papers from residents to non-residents (US$657 million), as foreign investors continued to seek higher yielding emerging market papers.

External Debt Ratios

“Looking at external debt indicators, these were observed to remain at comfortable levels at the end of the third quarter”, the Governor continued. Gross international reserves (GIR) of US$79.6 billion as of September 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 17.2 percent from 17.6 percent in June 2014 and 18.3 percent a year ago.  The same trend is observed using gross domestic product as denominator, despite the slower growth of the economy at 5.3 percent in the third quarter. 

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 6.9 percent in June 2014 and 8.2 percent a year ago to 6.4 percent . 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 remaining at 83.5 percent, hence keeping funding requirements for debt servicing at manageable levels since payments are spread out over a longer period of time.  [MLT accounts are those with maturities longer than one (1) year.] 

The weighted average maturity for all MLT accounts stood at 19.8 years, with public sector accounts having a longer average tenor of 21.9 years compared to 9.2 years for the private sector.
Short-term external debt comprised the 16.5 percent balance of the debt stock, consisting largely of trade credits, inter-bank borrowings and deposit liabilities.

Public sector external debt slightly declined from US$41.0 billion in June 2014 to US$40.7 billion due largely to negative FX revaluation adjustments (US$1.1 billion) on debts denominated in currencies other than the US Dollar.  This was partially offset by: (a) increased non-residents’ holdings of public sector debt papers (US$617 million); and (b) net availments (US$250 million).

Similarly, private sector debt was down to US$17.0 billion from US$17.1 billion a quarter ago as non-residents’ holdings of private sector debt papers issued offshore declined to US$1.8 billion from US$1.9 billion.

In terms of credit sources, the share of foreign holders of bonds and notes accounted for 37.5 percent of total, closely followed by official creditors (multilateral institutions and bilateral creditors) at 36.7 percent.  Foreign banks and other financial institutions stood at 17.3 percent, with the rest (8.5 percent) pertaining mainly to foreign suppliers/exporters.

The country’s debt stock remained largely denominated in US Dollar (53.7 percent) followed by borrowings in Japanese Yen (17.9 percent).

Multi-currency loans from the Asian Development Bank and the World Bank comprised 13.4 percent of total, while the rest of the accounts (15.0 percent) were denominated in 18 other currencies.

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