Foreign currency loans slip 4.2% in Q2

MANILA, Philippines — Foreign currency loans extended by Philippine banks declined by 4.22 percent as borrowers opted to prepay more of their financial obligations, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

BSP officer-in-charge Chuchi Fonacier said outstanding loans granted by foreign currency deposit units (FCDU) of banks reached $15.67 billion as of end-June, $690 million lower than the $16.36 billion recorded as of end-March as principal repayments exceeded disbursements.

FCDUs are allowed by the BSP to conduct transactions involving foreign currencies, including accepting deposits and extending loans.

The amount, however, was 11.9 percent higher than the $14 billion recorded as of end-June last year as foreign currency loans extended to Philippine residents jumped by nearly 13 percent to $10.31 billion from $9.15 billion, while those released to non-residents rose by 10.4 percent to $5.36 billion from $4.85 billion.

For end-June, the BSP said maturity mix of the loan portfolio remained biased toward medium-to long-term debt payable over a term of more than one year accounted for 75.6 percent of total or $11.85 billion.

The bulk of outstanding loans went to the following resident industries: towing, tanker, trucking and forwarding with 24.6 percent, merchandise and service exporters with 20 percent, public utility firms with 10 percent, producers or manufacturers, including oil companies with four percent.

Gross disbursements during the second quarter reached $14.6 billion and were six percent lower than the previous quarter’s figure.

In contrast, Fonacier said loan repayments climbed by nearly five percent resulting in overall net principal repayments of $676 million.

FCDU deposit liabilities likewise slipped by 1.3 percent to $37.9 billion from last quarter’s $38.4 billion level, with the bulk or 97.1 percent continuing to be held by residents.

A bigger stash of foreign currency deposits help boost the country’s gross international reserves (GIR) that serve as buffer against external shocks.

The country’s foreign exchange buffer stood at $77.83 billion as of end-August and enough to pay 7.5 month’s worth of imports of goods and payments of services and primary income.