Forex loans inch up to $16.8 B in Q1

MANILA, Philippines — Foreign currency loans extended by Philippine banks inched up by 2.75 percent to $16.81 billion in the first quarter from $16.36 billion in the same period last year as disbursements exceeded principal repayments, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP officer-in-charge Almasara Cyd Tuano-Amador said outstanding loans granted by foreign currency deposit units (FCDU) of banks continued to rise due to higher demand for capital.

“The said loan growth may be attributed to the borrowing firms’ higher working capital requirements as well as increased investment in plant or equipment,” Amador said.

FCDU loans by borrower represent foreign currency-denominated loans granted by FCDUs to various sectors of the economy.

As of end-March, the maturity profile of the FCDU loan portfolio remained predominantly medium- to long-term debt [or those payable over a term of more than one year, which represented 75.8 percent of total, higher than the previous year’s 74.2 percent.

The bulk of outstanding loans went to towing, tanker, trucking and forwarding with 24.3 percent, merchandise and service exporters with 18 percent, public utility firms with 8.7 percent, and producers or manufacturers, including oil companies with 3.9 percent.

Gross disbursements in the first quarter declined to $15.7 billion due to settlement of maturing loans that were not renewed.

Similarly, loan repayments were lower by 3.3 percent, thus, resulting in overall net disbursements.

The BSP said FCDU deposit liabilities went up by 4.17 percent to $40 billion in end March from $38.4 billion in end March last year due to the rising interest rates during the year.

The BSP lifted benchmark rates by 175 basis points between May and November last year to prevent inflation from spiraling out of control.

The tightening episode was a result of the acceleration of inflation to 5.2 percent last year from 2.9 percent in 2017 due to elevated oil and food prices as well as weak peso.

The central bank slashed interest rates by 25 basis points last May 9 due to easing inflation and slower than expected gross domestic product (GDP) growth of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter.