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Key External Debt Indicators Remain At Prudent Levels in Q3 2015


Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. announced that the outstanding Philippine external debt stood at US$75.6 billion as of end-September 2015, up by US$609 million (or 0.8 percent) from the end-June 2015 level of US$75.0 billion.

The increase in the debt level was attributed to: (a) net availments of US$960 million, mainly by the private sector, consisting of bank borrowings (intercompany accounts as well as loans for relending to fund various economic activities, among others); and (b) adjustments to reflect late reporting/corrections to previous periods’ transactions (US$419 million). The upward impact of these developments on debt stock was partially offset by the transfer of Philippine debt papers from non-residents to residents (US$803 million) amidst concerns on the forthcoming interest rate hike in the United States.

External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.

Year-on-year, the debt stock decreased by US$1.5 billion (or 1.9 percent) from US$77.1 billion as of end-September 2014 due to: (a) higher investments by residents in Philippine debt papers (US$2.4 billion); and (b) negative foreign exchange revaluation adjustments (US$1.4 billion) as the US Dollar strengthened with the gradual recovery of the US economy.  However, net availments (US$1.9 billion), coupled with previous audit periods’ adjustments (positive US$403 million) mitigated the downward impact of aforesaid developments.

External Debt Ratios

“Key external debt indicators were observed to have remained at comfortable levels in the third quarter of 2015”, the Governor continued. GIR stood at US$80.55 billion as of end-September 2015 and represented cover of 5.5 times for short-term (ST) debt under the original maturity concept.

 The external debt ratio (a solvency indicator), or total outstanding debt (EDT) expressed as a percentage of annual aggregate output (GNI), slightly increased to 21.5 percent as of end-September 2015 from 21.2 percent last quarter, but was much lower than the 22.7 percent recorded a year ago. The same trend was observed using GDP as denominator, as the Philippine economy grew by 6.0 percent during the third quarter of 2015.

The debt service ratio (DSR), which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations. While receipts during the 12-month period (October 2014 to September 2015) were lower, the ratio nevertheless improved to 5.6 percent in September 2015 from 6.0 percent in June 2015 and 6.4 percent in September 2014 due to a larger decline in payments. 

Debt Profile

The bulk (80.8 percent or US$61.1 billion) of the country’s external debt consisted of medium- and long-term (MLT) accounts [i.e., those with original maturities longer than one (1) year].  Thus, FX requirements for debt payments are well spread out and, therefore, more manageable.

The weighted average maturity of MLT accounts stood at 16.8 years.  Public sector debt have average tenor of 22.6 years due to the developmental nature of its borrowings; private sector loans had shorter average tenor of 8 years coinciding with the payback period of projects financed by these borrowings.
ST external debt comprised the 19.2 percent balance of outstanding debt, and consisted mainly of bank borrowings, intercompany accounts of foreign bank branches, trade credits, and deposit liabilities.
Public sector external debt comprised 50.1 percent (US$37.9 billion) of total debt stock, (with the bulk pertaining to the National Government) and was slightly lower compared to 51.5 percent (US$38.6 billion) in June 2015, accounted for largely by the increase in residents’ investments in Philippine debt papers (US$738 million).

Private sector debt represented 49.9 percent of total external debt and grew from US$36.4 billion to US$37.7 billion, due to net availments of US$1.1 billion attributed mainly to banks.

Obligations to foreign banks and other financial institutions comprised 32.4 percent of outstanding debt, up from the 30.5 percent share; followed by official sources (multilateral and bilateral creditors – 30.8 percent); foreign holders of Philippine bonds and notes (30.0 percent); and foreign suppliers/exporters
(6.8 percent).

The country’s debt stock remained largely denominated in US Dollar (64.3 percent) and Japanese Yen (12.2 percent). US dollar-denominated multi-currency loans from the World Bank and ADB comprised 11.6 percent, while the 11.9 percent balance pertain to 18 other currencies, including the Philippine Peso (7.2 percent), SDR (2.3 percent), and the Euro (1.6 percent). 

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