Philippines external debt rises as of end-September

MANILA, Philippines — The country’s external debt went up by more than five percent as of end-September, exceeding the Bangko Sentral ng Pilipinas (BSP)’s foreign exchange buffer as new borrowings exceeded loan repayments.

BSP Governor Nestor Espenilla Jr. said the country’s outstanding external debt stood at $76.4 billion as of end-September, 5.6 percent higher than the end-September 2017 level of $72.4 billion and 5.8 percent higher than the end-June level of $72.2 billion.

Public sector borrowings that cornered a share of 51.8 percent of the total external debt as of end-September rose to $39.5 billion from $38 billion as of end-June due mainly from the issuance of the $1.4 billion samurai bonds and availment of $911 million from multilateral lenders.

On the other hand, private sector debt which accounted for 48.2 percent of the total, went up by 7.9 percent to $36.9 billion as of end-September from $34.2 billion as of end-June due to commercial banks issuing notes offshore to diversify sources of liquidity and extend term liabilities as well as other private firms’ decision to expand working capital amid strong domestic demand.

Loans from official sources amounted to $24.8 billion and had the largest share of 32.4 percent of total outstanding debt, followed by foreign holders of bonds and notes

with 29.8 percent, and obligations to foreign banks and other financial institutions with 29.6 percent).

Espenilla attributed the increase in the debt levels in the third quarter to net availments aggregating $6 billion of both public and private sector.

He said the national government borrowed $2.2 billion more from July to September as it continued to expand financing for its infrastructure development under the Build Build Build program as well as social spending programs.

On the other hand, he said private companies borrowed $3.8 billion more due to their decision to increase working capital, expand funding base, and extend term liabilities.

The higher borrowing was partially offset by the $1.1 billion negative foreign exchange revaluation adjustments as the dollar strengthened against third currencies.

Espenilla said key external debt indicators remained at prudent levels despite the rise in external debt.

“Despite the increase in the foreign obligations, the Philippines’ external debt remains within prudent and manageable levels,” he said.

According to Espenilla, the country’s foreign debt pile exceeded the country’s gross international reserves (GIR) that thinned to $74.94 billion as of end-September.

The debt service ratio that measures the adequacy of the country’s foreign exchange earnings to meet maturing debt obligations remained a single-digit level of 6.5 percent and well below the international benchmark range of 20 to 25 percent.

The country’s external debt to gross domestic product (GDP) ratio stood at 23.5 percent as of end-September.

“The ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term,” Espenilla said.

The BSP chief pointed out the maturity profile of the country’s external debt remained predominantly medium- and long-term with maturities longer than one year for a share of 82.4 percent, while the short-term loans with maturities of up to one year accounted for the 17.6 percent.