Foreign currency loans grow double digits in June

MANILA, Philippines — Foreign currency loans extended by Philippine banks recorded a double-digit growth as of end-June amid strong demand as borrowers took advantage of lower interest rates, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said outstanding loans granted by foreign currency deposit units (FCDU) of banks stood at $17.5 billion as of end-June, 11.6 percent higher than the $15.7 billion recoded in the same period last year.

The foreign currency loans extended as of end-June was also four percent higher than the end-March level of $16.8 billion as disbursements continued to exceed principal repayments.

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements as well as banks’ lower interest rates,” Diokno said.

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

Diokno said the maturity mix of the loan portfolio remained biased toward medium to long-term debt or those payable over a term of more than one year, which represented 78.1 percent of total, higher than the previous year’s 75.6 percent.

He said the bulk of outstanding loans went to towing, tanker, trucking and forwarding with 23.7 percent, merchandise and service exporters with 16.4 percent, public utility firms with 8.3 percent and producers or manufacturers including oil companies with 4.3 percent.

The BSP chief said gross disbursements increased by 6.5 percent to $16.7 billion in the second quarter due to borrowing firms’ higher working capital requirements and availment of loan by a government corporation in the power sector.

Similarly, Diokno said loan repayments went up by 3.5 percent, resulting in overall net disbursements in the second quarter.

FCDU deposit liabilities likewise increased by nine percent to $41.3 billion as of end-June from $37.9 billion a year ago and by 3.4 percent from $40 billion in end-March this year.

Diokno said the FCDU deposit liabilities held mostly by residents continued to beef up the country’s gross international reserves (GIR).