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Outstanding External Debt Declines Further in Q2 2017

09.15.2017

Bangko Sentral ng Pilipinas Officer-In-Charge Diwa C. Guinigundo announced that outstanding Philippine external debt stood US$72.5 billion as of end-June 2017, down by US$1.3 billion (or 1.8 percent) from the US$73.8 billion end-March 2017 level.

The decline in debt stock during the second quarter was brought about by US$1.2 billion net repayments, largely by the private sector, and an increase in residents’ investments in Philippine debt papers issued offshore of US$110 million.

On a year-on-year basis, the debt stock likewise substantially dropped by US$5.2 billion (or 6.7 percent) from US$77.7 billion a year ago due to: (a) net principal repayments by both the public and private sectors (US$2.7 billion); (b) previous periods’ adjustments (negative US$1.4 billion) due to late reporting; and (c) negative FX revaluation adjustments (US$1.2 billion) arising from strengthening of the US Dollar against other currencies, particularly the Yen and the Philippine Peso.

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

External Debt Ratios

The Officer-In-Charge further stated that key external debt indicators remained at comfortable levels during the second quarter of 2017. Gross international reserves stood at US$81.3 billion as of end-June 2017 and represents 5.6 times cover for short-term (ST) debt under the original maturity concept.

The 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.

As of end-June 2017, the ratio improved to 6.6 percent compared to 8.8 percent in end-March 2017 due to higher receipts and lower payments during the 12-month period (July 2016 – June 2017).  The DSR has also consistently remained well below the international benchmark range of 20.0 to 25.0 percent.

The external debt ratio (a solvency indicator), or total outstanding debt (EDT) expressed as a percentage of annual aggregate output (GNI), continued to improve, and was recorded at 19.5 percent from 20.0 percent in the first quarter of 2017 and 21.7 percent a year ago. The same trend was observed using GDP as denominator, with the Philippine economy growing by 6.5 percent in the second quarter of 2017.

Debt Profile

The country’s external debt remained largely medium- to long-term (MLT) in nature and represented 79.9 percent of total. This means that FX requirements for debt payments are well spread out and, thus, more manageable. [MLT accounts are those with maturities longer than one (1) year.]

The weighted average maturity of MLT accounts stood at 17.9 years, with public sector borrowings having a longer average term of 23.7 years compared to 8.1 years for the private sector. 

ST liabilities comprised the 20.1 percent balance of debt stock and consisted of bank liabilities, trade credits and others.

Public sector external debt stood at US$37.5 billion (51.7 percent of total debt stock), lower than the previous quarter’s US$37.7 billion (51.0 percent of total) due to a US$122 million decline in non-residents’ investments in public sector debt papers issued offshore and net repayments of US$121 million. About US$30.5 billion (81.3 percent of public sector obligations) of these accounts were NG borrowings.

Private sector debt similarly dropped to US$35.0 billion (48.3 percent of total) from US$36.1 billion last quarter, largely due to net repayments of US$1.1 billion. 

Loans from official sources (multilateral and bilateral creditors – US$23.7 billion) and foreign banks and other financial institutions (US$23.7 billion) comprised the largest share of total outstanding debt at 32.7 percent each.  Borrowings in the form of bonds/notes held by non-residents (US$20.3 billion) accounted for 28.1 percent, while the rest (US$4.8 billion or 6.6 percent) were mostly owed to foreign suppliers/ exporters.

In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (62.8 percent) and Japanese Yen (12.8 percent). US Dollar-denominated multi-currency loans from the World Bank and Asian Development Bank had a 13.9 percent share to total, while the remaining 10.5 percent balance pertained to 17 other currencies, including the Philippine Peso (6.5 percent), SDR (2.2 percent), and the Euro (1.3 percent).

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