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Philippine External Debt Declines in September

12.23.2005

The country’s outstanding external debt approved/registered by the Bangko Sentral ng Pilipinas stood at US$55.5 billion at the close of September 2005, down by US$567 million or 1.0 percent from the US$56.0 billion level in June 2005. On a year-on-year basis, debt stock declined by US$130 million or 0.2 percent from the US$55.6 billion level.

The country’s external debt ratio, or total outstanding external debt as a percentage of aggregate output or GNP, was estimated at 55.5 percent as of September 2005, an improvement of 4.8 percentage points over the 60.3 percent level a year ago.  This reflected the strengthened position of the country to pay maturing foreign obligations on a continuing basis.

The country’s debt service ratio, or total principal and interest payments as a percentage of total exports of goods and receipts from services and income, was estimated at 14.1 percent as of the end of the third quarter, reflecting an improvement from the 14.7 percent level a year ago.  The ratio is well below the 20 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to meet current maturities of foreign obligations.

The decline in debt stock during the third quarter resulted largely from negative foreign exchange revaluation adjustment as the U.S. dollar strengthened vis-à-vis the Japanese yen as well as from the increase in residents’ investments in Philippine debt papers.

The maturity profile of the debt stock remained favorable, with medium- to long-term accounts representing 89 percent of the total. These loans, with original tenors of more than one year, had a weighted average maturity of 17.4 years. Public sector borrowings had a longer average term of almost 20 years, compared to 10.5 years for the private sector.

The gross international reserves of US$18.1 billion as of end-November 2005 represented 2.9 times the level of short-term debt under the original maturity concept, and 1.7 times of short-term debt based on the remaining maturity concept. Short-term accounts under the remaining maturity concept consist of loans with original maturities of one year or less plus amortizations on medium and long-term accounts falling due within the next 12 months from the reference period, in this case September 2005.

External liabilities of the public sector represented 67.9 percent of total, with the balance pertaining to the private sector.   A moderate yet steady decline of public sector share to total external debt has been observed during the past four quarters, from 69.1 percent in December 2004 to 68.6 percent in March 2005, and 68.2 percent in June.

Meanwhile, the country’s continuing access to a wide investor base was evident in the diversified creditor profile of outstanding liabilities. Official creditors (consisting of multilateral and bilateral institutions) accounted for 40.4 percent of total, followed by foreign holders of bonds and notes at 32.1 percent, and foreign banks and other financial institutions, 22.0 percent. The rest of the creditors (5.5 percent) were mostly suppliers.

Gross disbursements on medium- and long-term accounts during the third quarter reached more than US$1.7 billion, pertaining mainly to the public sector to partially cover payments on foreign currency obligations as well as to fund infrastructure and social services projects. Disbursements on private sector accounts were used for transportation, communications and power generation projects.

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