Foreign debt slips to $72.2 billion in June

MANILA, Philippines — Prudent debt management and deleveraging from foreign borrowings by Philippine companies to minimize foreign exchange risks helped trim the country’s external debt in the first half, according to the Bangko Sentral ng Pilipinas.

Governor Nestor Espenilla Jr. said the country’s external debt stood at $72.2 billion as of end-June, $294 million lower than the $72.49 billion in the same period last year.

Espenilla said the slight decline was brought about by offsetting factors including net principal repayments amounting to $2.4 billion, primarily on private sector’s short-term bank liabilities.

He also cited prior periods’ adjustments amounting to $1.8 billion due to late reporting as well as the transfer of Philippine debt papers from residents to non-residents reaching $419 million.

Espenilla said the country’s external debt has steadily been declining from $79.95 billion in 2012, $78.49 billion in 2013, $77.67 billion in 2014, $77.47 billion in 2015, $74.76 billion in 2016, and $73.1 billion in 2017 due to prudent debt management and Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize foreign exchange risk.

Data from the BSP said the country’s foreign obligations as of end-June was also $997 million lower than the end-March level of $73.2 billion.

The reduction in the debt stock during the second quarter was mainly driven by negative foreign exchange revaluation adjustments amounting to $720 million as the dollar strengthened against third currencies, particularly the Japanese yen with $454 million.

Likewise, Espenilla attributed the $309 million decline in non-resident investments in Philippine debt papers and net principal repayments amounting to $246 million further contributed to the decline in the external debt stock.

Public sector debt reached $38 billion or 52.6 percent of the total debt stock as of end-June, $1.2 billion lower than the end-March level of $39.2 billion due to negative foreign exchange revaluation adjustments, increase in residents’ investments in debt papers issued offshore by the public sector, and net principal repayments.

Of the total amount, about 83.5 percent or $31.7 billion were borrowings by the national government.

On the other hand, private sector debt accounted for the remaining 47.4 percent or $34.2 billion.

 “Private sector foreign borrowings have been declining in recent years which may be attributed to Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize foreign exchange risk, among others,” he said.

External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics. The debt stock remained largely denominated in dollar, accounting for 61.5 percent and Japanese yen with 12.9 percent.

The dollar-denominated multi-currency loans from the World Bank and the Asian Development Bank represented 14.6 percent of total, while the 11 percent balance pertained to 17 other currencies, including the Philippine pesos with six percent, the International Monetary Fund with two percent, and the euro with two percent.

About 83.2percent of the country’s outstanding external debt had a weighted average maturity of 17.1 years, while short term accounts with maturities of less than one year cornered 16.8 percent of the total external debt.