MANILA, Philippines – The country’s external debt increased by $1.9 billion or 2.5% in the 4th quarter of 2015, attributed to net borrowing of $1.8 billion mainly by private banks and firms to finance projects.
The outstanding Philippine external debt stood at $77.5 billion as of end-2015, up from the end-September 2015 level of $75.6 billion, said Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr in a statement on Monday, March 21.
External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.
Despite the increase, the BSP pointed out that on a year-on-year basis, the debt stock declined by $200 million from the $77.7 billion figure for 2014.
This was due to increased investments in Philippine debt papers of $1.8 billion by residents, the majority of which came from banks.
Another factor was the $456 million negative foreign exchange revaluation adjustments due to the strengthening of the US dollar in 2015. This was on the view of US economic recovery expectations following a US Federal Reserve interest rate hike, the BSP said.
“A stronger dollar results in a lower debt figure expressed in US dollar terms,” Tetangco explained.
The BSP noted, however, that the full downward impact on debt stock of these factors was partly negated by around $2 billion, because of net availments (excess of drawings over debt payments) and the previous periods’ audit adjustments.
External debt at comfortable levels
Tetangco also said “key external debt indicators remained at comfortable levels at the close of the year.”
Gross international reserves stood at $80.7 billion as of end-2015 and represented cover of 5.3 times for short-term debt under the original maturity concept.
The external debt ratio improved from 22.5% in 2014 to 21.9% by year-end as a result of the country’s sustained economic growth.
The ratio is a key solvency indicator which looks at total outstanding debt expressed as a percentage the country’s gross national income (GNI) or total annual aggregate output.
The debt service ratio (DSR) improved to 5.3% in December 2015 from 5.6% in September 2015 and 6.3% in December 2014 due to a larger decline in payments vis-à-vis receipts.
The DSR is a measure of whether the country’s foreign exchange earnings can meet maturing obligations by comparing principal and interest payments to exports of goods and receipts from services and primary income.
Mostly dollar-denominated long-term debt
The country’s external debt continued to be dominated by medium- to long-term (MLT) accounts, which means payments would be spread out over longer periods.
MLT debt, or those with original maturities longer than one year, accounted for 80.5% of the total.
The weighted average maturity for all MLT accounts stood at 16.5 years, with public sector debt having a longer average term of 22.5 years compared to the 7.9 years for the private sector.
Short-term external debt comprised 19.5% of debt stock, and consisted mainly of bank borrowings, intercompany accounts of foreign bank branches, trade credits, and deposit liabilities.
Private sector external debt stood at $39.2 billion and 50.6% of total debt, higher by $1.5 billion from the end-September 2015 level of $37.7 billion due to higher liabilities of banks.
Public sector debt, meanwhile, grew from $37.9 billion to $38.3 billion, with the bulk borrowed by the national government at $30.8 billion.
Obligations to foreign banks and other financial institutions comprised the largest share of outstanding debt at 33.9%, followed by official sources, multilateral and bilateral creditors at 30.3%.
Borrowings in the form of bonds/notes held by non-residents accounted for 29.7%, while 6.1% is mostly owed to foreign suppliers or exporters.
The bulk of the country’s debt stock remained denominated in US dollar (65.5%) and Japanese yen (11.7%).
US dollar-denominated multi-currency loans from the World Bank and the Asian Development Bank had an 11.8% share, while the remaining 11% consisted of 17 other currencies, including the Philippine peso at 6.6%. – Rappler.com