Philippines' foreign debt rises 7.4% to $87.5B as of end-June —BSP

The Philippines’ running foreign debt stock stood at $87.5 billion as of end-June 2020 as the government ramped up borrowing efforts to fund COVID-19 response and recovery initiatives.

In a statement, BSP Governor Benjamin Diokno said the end-June 2020 outstanding external debt is higher by $6 billion or 7.4% from the $81.4-billion level as of end-March 2020.

“The rise in the debt stock during the second quarter was due to net availments of $2.9 billion, largely attributed to the National Government (NG) as the NG raised $2.4 billion from the issuance of global bonds and $3.1 billion from multilateral and bilateral creditors to fund its general financing requirements and COVID-19 pandemic response programs/projects,” Diokno said.

The central bank chief also attributed the rise in the country’s foreign debt to the following:

• prior periods’ adjustments of $2.1 billion
• increase in non-residents’ investment in Philippine debt papers issued offshore of $839 million
• positive foreign exchange (FX) revaluation of $227 million as the US dollar weakened against other currencies, including the Philippine peso

The BSP defines external debt as all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.

Diokno said that despite the increase in the external debt level, key external debt indicators remained at prudent levels.

“Gross International Reserves stood at $93.5 billion as of end-June 2020 and represented 8.7 times cover for short-term debt under the original maturity concept,” the central bank chief said.

For January to June 2020, the debt service ratio (DSR) slightly increased to 7.8% from 7.7% recorded for the same period a year ago. 

The DSR has consistently remained at single digit levels, according to Diokno.

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 foreign exchange earnings to meet maturing obligations.

As a percentage of gross domestic product (GDP), the country’s outstanding external debt increased to 23.7% from 21.4% as of end-March “as GDP declined by 16.5% while external debt rose during the reference quarter.”

“The ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term (MLT),” Diokno said.

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

In particular, public sector external debt increased to $51.0 billion as of end-June from $45.1 billion as of end-March.

“About $44.4 billion of public sector obligations were NG borrowings while the remaining $6.6 billion pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP,” Diokno said.

Private sector, meanwhile, had a total foreign debt of $36.5 billion during the period from $36.3 billion as of end-March.

The private sector’s share to the country’s total external debt decreased from 44.6% to 41.7%.

The Philippines’ major creditor countries were Japan at $15.3 billion, United States of America at $3.2 billion, The Netherlands at $3.1 billion, and the United Kingdom at $2.6 billion.

Loans from official sources or multilateral and bilateral creditors - comprised of Japan at $8.2 billion; China at $1.1 billion; and Republic of Korea at $514 million, among others - had the largest share of 34.9% of total outstanding debt, followed by foreign holders of bonds and notes at 33.6%.

Meanwhile, obligations to foreign banks and other financial institutions partake 26.3%; and the rest of 5.1% were owed to other creditor types mainly suppliers or exporters.

In terms of currency mix, the country’s debt stock remained largely denominated in the US dollar at 55.4% and Japanese yen at 12.4%.

“US dollar-denominated multi-currency loans from the World Bank and ADB represented 18.5%,” Diokno said.

“The 13.7% balance pertained to 15 other currencies, including the Philippine peso, euro and Special Drawing Rights,” he said. -NB, GMA News