PH external debt inches up to $77.7 B for H1 2016

MANILA, Philippines  – The Philippines debt stock owed to foreign creditors rose slightly from its first quarters levels due to foreign exchange (forex) fluctuations, although they remain at a comfortable level, according to the Bangko Sentral ng Pilipinas (BSP).

Outstanding Philippine external debt stood at $77.7 billion as of end-June 2016, up by $81 million or 0.1% from its end-March 2016 level of $77.6 billion, BSP governor Amado Tetangco Jr announced on Friday, September 16.

The central bank attributed the increase to forex revaluation adjustments that amounted to $821 million as the US dollar weakened, particularly against the Japanese yen.

The impact of this, the BSP pointed out, was offset by net repayments of $680 million, adjustments to the previous period due to late reporting at $44 million, and a reduction in non-resident holdings of Philippine debt papers worth $17 million.

Compared to the same period last year, external debt stock rose by $2.7 billion, or by 3.6%, which BSP explained was the result of forex revaluation and other adjustments in previous periods amounting to $2.6 billion, as well as net availments of $561 million.

This were partially offset by a $424 million decline in non-resident investments in Philippine debt papers issued offshore.

Still comfortable

Despite the increase, Tetangco stated that key external debt indicators remained at comfortable levels in the second quarter of 2016.

In particular he pointed out that the country's Gross international Reserves (GIR) stood at $85.3 billion as of end-June 2016 compared to the $83.0 billion in March 2016, representing 5.9 times cover for short-term debt.

Tetangco also pointed out that the external debt ratio, or total outstanding debt as a percentage of Gross National Income (GNI), improved to 21.7% from the  21.9% level in March 2016.

This, however, was higher than the 21.3% level recorded a year ago.

The central bank also noted that the current Debt Service Ratio, or principal and interest payments to exports of goods and receipts from services and primary income, stands at 6.2% from the 6.1% level as of end-March 2016

The debt service ratio is a measure of adequacy of the country’s forex earnings to meet maturing obligations. The BSP also noted that the ratio has consistently remained at single digit levels since 2010 and well below the international benchmark range of 20.0–25.0%.

Mostly medium and long-term debt

The majority of the external debt stock, 81.3 % or $63.2 billion, continued to be largely medium- to long-term in nature with original maturities of more than one year. The BSP noted that this means debt payment becomes more manageable as payments can be spread out.

It also pointed that the weighted average maturity for all MLT accounts improved to 17.1 years by end-June 2016, from the 16.9 years in the preceding quarter.  Public sector debt was noted to have a longer average term of 23.0 years compared to 8.0 years for the private sector.

Short-term liabilities accounted for the 18.7% balance of debt stock and consisted of bank borrowings, intercompany accounts of foreign bank branches, trade credits, and deposit liabilities.

Public sector borrowings stood at $39.4 billion, representing or 50.7% of total debt stock.

This is higher by $440 million from the $38.9 billion level in March, due again to FX revaluation adjustments of $822 million, slightly mitigated by net repayments of $229 million, and a decline in non-resident investments in Philippine debt papers of $151 million.

On the other hand, private sector debt totaled US$38.4 billion – down by $360 million from March 2016 – due largely to net repayments of $450 million, compared to an increase in non-resident holdings of private sector debt papers issued offshore, at $134 million.

Obligations to foreign banks and other financial institutions continued to have the largest share (32.6 %) of outstanding debt, followed by official sources multilateral and bilateral creditors such as development banks at 31.7%. 

Borrowings in the form of bonds/notes held by non-residents accounted for 29.1%, while the remaining 6.6% balance were owed to other creditor types, mainly suppliers and exporters.

The debt stock continues to be largely denominated in US dollar at 63.0% and Japanese yen at 12.5 %.

US dollar-denominated multi-currency loans from the World Bank and the Asian Development Bank represented 12.5% of total, while the 10.9% balance pertained to 17 other currencies, including the Philippine peso (7.1%), Special Drawing Rights (2.2 %), and the Euro (1.1 %). – Rappler.com