External debt remains manageable, says BSP

MANILA, Philippines – The country’s outstanding external debt ratios remained at comfortable levels amid the 3.1 percent increase in the first quarter brought about by foreign exchange adjustments, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

BSP Gov. Amando Tetangco Jr. said external debt stood at $77.6 billion in end-March this year or $2.3 billion higher than the $75.3 billion in the same period last year.

The rise was traced to the $2.1 billion increase in net availments as well as the $1.7 billion higher foreign exchange revaluation and other adjustments.

The increase was partially offset by the $1.4 billion decline in non-resident investments in Philippine debt papers.

The data showed the end-March external debt level was also $166 million higher from the end 2015 level of $77.5 billion due to the $814 million foreign exchange revaluation as the dollar weakened against other currencies particularly the Japanese yen, as well as the $833 million rise in investments in Philippine debt papers by non-resident investors.

The increase was offsets by the $1.5 billion increase in net repayments mainly by banks.

External debt refers to all types of borrowings by Philippine residents from non-residents. About 63 percent of the country’s external debt is denominated in dollar while 12.4 percent are in Japanese yen.

About 12.5 percent of the external debt are dollar-denominated multi-currency loans from the World Bank and Asian Development Bank, while 17 percent are denominated in 18 other currencies including the peso with 8.1 percent, the special drawing rights of the International Monetary Fund (IMF) with 2.2 percent, and the Euro with 1.2 percent. 

Despite the increase in the first quarter, Tetangco said the country’s external debt remained at comfortable levels.

“Key external debt indicators remained at very comfortable levels in the first quarter of 2016,” Tetangco said.

The BSP chief said the country’s gross international reserves (GIR) that stood at $83 billion as of end-March this year, enough to cover of 5.8 times for short-term debt under the original maturity concept.

Data also showed the external debt ratio or total outstanding debt expressed as a percentage of annual aggregate output was unchanged at 26.5 percent even if the country’s gross domestic product (GDP) growth accelerated to 6.9 percent in the first quarter of the year.

The debt service ratio continued to improve to 5.9 percent in end March but remained well below the international benchmark of 20 to 25 percent.

About 81.6 percent or P63.3 billion 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 16.9 years.

“This means the foreign exchange requirements for debt payments are well spread out and more manageable,” Tetangco said.

The public sector debt amounting to $37.9 billion or 50.1 of the total external debt has an average tenor of 22.8 years due to the developmental nature of its borrowings.