January 24, 2018, 9:17 am
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External debt ratios remain at comfortable levels in Q3

Outstanding Philippine external debt stood $72.4 billion as of end-September 2017, marginally lower by $125 million or 0.2 percent than the end-June 2017 level of $72.5 billion.

The slight decline in debt stock during the third quarter was brought about by offsetting factors, which included the $805 million net repayments and $91 million increase in residents’ investments in Philippine debt papers issued offshore, which decreased external debt vis-à-vis the $793 million increase arising from adjustments on prior period transactions.

On a year-on-year basis, the debt stock substantially dropped by $4.3 billion from $76.6 billion a year ago.

This was due to: net principal repayments by both the public and private sectors worth $2.9 billion; negative FX revaluation adjustments worth $1.3 billion arising from strengthening of the US dollar against other currencies, particularly the yen and the peso; and increase in residents’ holdings of Philippine debt papers issued offshore worth $120 million. 

The peso’s depreciation during the period may have encouraged a shift in borrower preference from foreign to domestic financing to minimize exposure to exchange rate volatility.

External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.

The Bangko Sentral ng Pilipinas further stated that key external debt indicators remained at comfortable levels during the third quarter of 2017. 

Gross international reserves stood at $81.0 billion as of end-September 2017 and represented 5.7 times cover for short-term debt under the original maturity concept.

The DSR, which relates principal and interest payments  to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations. 

As of end-September 2017, the ratio improved to 6.1 percent compared to 6.6 percent in end-June 2017 due to higher receipts during the 12-month period. 

The external debt ratio, or total outstanding debt expressed as a percentage of annual aggregate output, remained at 19.5 percent, similar to last quarter’s figure, but an improvement from 21.1 percent a year ago. 

The same trend was observed using GDP as denominator, with the Philippine economy growing by 6.9 percent in the third quarter of 2017.

The country’s external debt remained largely medium- to long-term (MLT) in nature and represented 80.4 percent of total. This means that FX requirements for debt payments are well spread out and, thus, more manageable. 

The weighted average maturity of MLT accounts stood at 17.4 years, with public sector borrowings having a longer average term of 23.1 years compared to 8.0 years for the private sector. 

Short term (ST) liabilities comprised the 19.6 percent balance of debt stock and consisted of bank liabilities, trade credits and others.

Public sector external debt stood at $37.2 billion, lower than the previous quarter’s $37.5 billion due to a $360 million decline in non-residents’ investments in public sector debt papers issued offshore outweighing net availments of $96 million. 

About $30.4 billion or 81.6 percent of public sector obligations of these accounts were NG borrowings.

Private sector debt slightly increased to $35.1 billion from $35.0 billion last quarter, due to net repayments being offset by adjustments on prior periods’ transactions and transfer of credits from residents to non-residents.

Loans from official sources, at $24.0 billion, and foreign banks and other financial institutions at $22.3 billion, comprised the largest share of total outstanding debt at 33.2 percent and 30.8 percent, respectively. 

In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (61.5 percent) and Japanese Yen (13.0 percent). 

US Dollar-denominated multi-currency loans from the World Bank and Asian Development Bank had a 14.3 percent share to total, while the remaining 11.2 percent balance pertained to 17 other currencies, including the Philippine Peso (7.0 percent), SDR (2.2 percent), and the Euro (1.3 percent).
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