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Philippine External Debt Rose by 2.2% in 4th Quarter of 2003

03.30.2004

Bangko Sentral Governor Rafael Buenaventura announced today that, as of December 31, 2003, the country’s outstanding external debt approved/registered by the Bangko Sentral stood at US$57.4 billion, up by US$1.2 billion or 2.2 percent from the end-September 2003 level of US$56.2 billion. On an annual basis, external debt grew by US$3.8 billion or 7 percent from US$53.6 billion at end-2002.

“Accounts with medium to long-term maturities continued to represent the bulk of outstanding debt at 89.2 percent”, the Governor said. The weighted average maturity of these loans improved further from 17.0 years in September to 17.2 years by December 2003, as a result of concerted efforts by government agencies, including the Bangko Sentral, to lengthen the maturity of new borrowings. The average maturity of public sector accounts was even longer at 19.4 years. Gross International Reserves of US$16.9 billion as of end-December 2003 represented 2.7 times the level of short-term accounts (those with maturities of less than one year) under the original maturity concept and 1.5 times based on the remaining maturity concept.

The country maintained a diversified creditor profile with official creditors (international financial institutions, foreign governments and their agencies), accounting for 45.2 percent of total, followed by foreign holders of bonds and notes with a 29.8 percent share, and banks and other financial institutions with 18.6 percent.

The country’s external debt remained largely denominated in two currencies: the US Dollar (53.9 percent) and the Japanese Yen (27.7 percent). The rest were in 16 other currencies with the Euro accounting for 4.7 percent and Special Drawing Rights, 3.9 percent.

During the fourth quarter, the increase in external debt was accounted for mainly by net foreign exchange inflows from loan transactions of US$0.93 billion as well as upward revaluation adjustments of US$0.94 billion. The weakening of the US Dollar against other major currencies, particularly the Japanese Yen during the quarter raised the US Dollar equivalent of third-currency denominated accounts. The impact on debt service burden, however, is not immediate as repayments of most of these accounts are well spread out into the future.

The Governor noted that, these developments on debt stock were partly offset by downward adjustments totaling US$0.63 billion as a consequence of two factors, namely: (1) the US$0.56 billion increase in the share of local banks and other residents in syndicated loans and Philippine debt papers issued offshore; and (2) the US$0.07 billion negative adjustment arising from audit findings.

Gross disbursements on medium and long-term accounts during the last quarter of 2003 amounted to more than US$2.7 billion. Public sector borrowings accounted for 73.4 percent of total loan inflows and were intended largely for budgetary requirements, various infrastructure projects, international reserve management, and re-lending to bank clients.

With respect to the private sector, about 27 percent of loan proceeds were utilized by banks for raising Tier 2 capital in compliance with prescribed capitalization requirements. Loans of private non-bank corporations financed projects in the power, transportation and communication sectors.

Bangko Sentral has implemented a revised treatment for OBU accounts to align Philippine statistics with international best practice. OBUs, which have previously been treated as non-residents for regulatory and statistical purposes, are now classified as residents in monetary and financial statistics. In the case of external debt, the data series has been revised to reflect the new treatment and ensure data comparability over time. The revised data will be available at the BSP website starting March 31, 2004.

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