Foreign debt slips to $97 billion

MANILA, Philippines — The country’s external debt slipped by 1.5 percent to $97.05 billion as of end-March from $98.49 billion in end-2020 as the government paid more foreign obligations, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said the $1.44- billion decline during the first quarter was mainly due to the $3.1-billion net repayments as private local banks settled more foreign debt, while the national government redeemed its maturing obligations.

Diokno also said the negative foreign exchange revaluation of $1 billion further contributed to the decrease as the dollar strengthened against other currencies amid the rise in US Treasury bond yields, among others.

He said the downward impact of the net repayments and foreign exchange revaluation more than offset prior periods’ adjustments amounting to $2.3 billion and the $365-million increase in non-resident investments in Philippine debt papers issued offshore.

Year-on-year, Diokno said the country’s external debt stock went up by 19.2 percent from $81.42 billion in end-March last year as the government borrowed more to bankroll its COVID-19 response measures.

The BSP chief said the $15.6 billion rise in the debt level could be attributed to the $13.5 billion net availments by the national government and private non-banks as well as the transfer of Philippine debt papers from residents to non-residents amounting to $1.1 billion.

Furthermore, he said the prior periods’ adjustments of $687 million and positive foreign exchange revaluation of $390 million pushed the country’s foreign obligations higher year-on-year.

Diokno said the country’s external debt indicators remained at prudent levels, while the gross international reserves (GIR) level stood at $104.5 billion in end-March, equivalent to 7.7 times cover of the short-term debt.

Data showed the debt service ratio increased to 13.5 percent in the first quarter from 10.9 percent in the same quarter last year due to higher payments and lower receipts, while the total outstanding debt (EDT) expressed as a percentage of gross domestic product (GDP) improved to 26.7 percent from 27.2 percent.

“The country’s EDT to GDP ratio remains one of the lowest compared to other ASEAN member countries,” Diokno said.

Public sector external debt declined by 2.2 percent to $56.8 billion in end- March from $58.1 billion in end-December, accounting for 58.5 percent of the country’s foreign debt.

The national government accounted for 89.4 percent or $50.8 billion of the total public sector debt, while government-owned and controlled corporations, government financial institutions and the BSP cornered the remaining 10.6 percent or $5.9 billion.

On the other hand, the external debt of private companies amounted to $40.3 billion for a share of 41.5 percent.

According to the BSP, major creditor countries include Japan ($15.3 billion) followed by the Netherlands ($3.2 billion), the US ($3 billion) and the United Kingdom ($2.5 billion).

Loans in the form of bonds or notes had the largest share with 35.8 percent, followed by borrowings from multilateral lending institutions and bilateral creditors with 35.7 percent and obligations to foreign banks and other financial institutions with 22.5 percent. The remaining six percent was owed other creditors such as suppliers and exporters.

In terms of currency mix, the country’s debt stock remained largely denominated in dollar with 56.9 percent and Japanese yen with 11.4 percent. Dollar-denominated multi-currency loans from the World Bank and the Asian Development Bank represented 19.5 percent.

Data showed the maturity profile of the country’s external debt remained predominantly medium and long-term in nature, with original maturities longer than one year with share to total at 86 percent, while short-term accounts with maturities of up to one year comprised the 14 percent balance.

“This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable,” Diokno said.

The national government borrows heavily from foreign and domestic creditors to finance the country’s budget deficit as it spends more than what it actually earns. The country’s budget shortfall ballooned as the pandemic-induced recession pulled down revenue collections, while spending soared to finance COVID-19 response measures.