Foreign debt shrinks to $77.5 B

Stronger dollar, higher investments in Philippine papers 

MANILA, Philippines - The country’s outstanding external debt slipped for the third straight year in 2015 due to the continued strengthening of the dollar as well as higher investments in Philippine debt papers, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said external debt amounted to $77.47 billion last year, $200 million lower compared with $77.67 billion in 2014.

This was the third straight year the country’s external debt declined from $79.95 billion in 2012 to  $78.49 billion in 2013 and to $77.67 billion in 2014.

Tetangco traced the improvement in the country’s external debt level to the $1.8 billion increase in investments largely by banks in Philippine debt papers.

The BSP chief also cited the $456 million negative revaluation adjustments due to the strengthening of the greenback last year in view of the gradual recovery of the US economy and expectations of the interest rate liftoff by the US Federal Reserve.

“A stronger dollar results in lower debt figure expressed in US dollar terms,” he said.

However, the $2 billion net availments as debt drawdowns exceeded payments as well as previous periods’ audit adjustments negated the impact of higher investments and a stronger US dollar.

External debt refers to all types of borrowings by Philippine residents from non-residents. More than 65 percent of the country’s external debt is denominated in US dollar, while 11.7 percent of total debt is denominated in Japanese yen.

About 11.8 percent of the external debt is US dollar-denominated multi-currency loans from the World Bank (WB) and Asian Development Bank (ADB) while 11 percent are denominated in 17 other currencies including the peso with 6.6 percent, the special drawing rights of the International Monetary Fund (IMF) with 2.2 percent, and the euro with 1.5 percent.

The country’s external debt at end-2015 was 2.5 percent higher compared to the end-September level of $75.6 billion. The increase was attributed to net availments amounting to $1.8 billion by private banks and corporations to finance various projects arising from positive sentiment.

Data from the central bank showed the country’s gross international reserves (GIR) amounted to $80.7 billion last year, enough to cover 5.3 times the country’s short-term debt under the original maturity concept.

“Key external debt indicators remained at comfortable levels at the close of the year,” Tetangco said.

The debt service ratio continued to improve to 5.3 percent in end December from 5.6 percent in September and from 6.3 percent in December 2014 due to a larger decline in payments.

About 80.5 percent of the country’s outstanding external debt consisted of medium- and long-term accounts set to mature in over a year. The weighted average maturity of these accounts stood at 16.5 years.

“This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable,” he added.

On the other hand, short-term external debt comprised 19.5 percent of the country’s total external borrowings.