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BSP: Philippines' external debt-to-GDP ratio at ‘prudent levels’ as of end-March

The Philippines’ running foreign debt relative to the size of the economy remained at manageable levels, the Bangko Sentral ng Pilipinas (BSP) said Friday.

In a statement, BSP Governor Benjamin Diokno said that the country’s outstanding external debt (EDT) to gross domestic product (GDP) ratio stood at 27.5% as of end-March 2022.

“The ratio remains one of the lowest as compared to other ASEAN member countries,” Diokno said.

“The low EDT-to-GDP ratio indicates the country’s sustained strong position to service foreign borrowings." 

Other key external debt indicators also remained at prudent levels, the BSP chief said.

In particular, the country’s gross international reserves (GIR) — a measure of a country's ability to settle import payments and service foreign debt — stood at $107.3 billion as of end-March 2022, representing 7.7 times cover for short-term (ST) debt based on the original maturity concept.

The country’s debt service ratio (DSR) also dropped to 4.1% from the 14.3% recorded for the same period last year due to scheduled lower repayments accompanied by higher receipts.

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

External debt—which refers to all types of borrowings by Philippine residents from non-residents—amounted to $109.8 billion as of end-March 2022, up 3.1% or by $3.3 billion from the $106.4 billion level as of end-December 2021.

“The rise in the debt level during the first quarter of 2022 was due to net availments of $3.5 billion, mainly by the National Government (NG) and private non-banks,” Diokno said.

The government raised $2.3 billion from official creditors to fund its COVID-19 pandemic response programs and infrastructure projects, as well as $2.3 billion from the issuance of global bonds under its 2022 Commercial Borrowings Program.

The recent issuance includes the debut of NG’s sustainability bond, which aims to finance climate change mitigation and adaptation projects, among others.

Meanwhile, non-bank private sector borrowers sought external credit amounting to $995 million, primarily to augment their working capital and finance their projects. 

In terms of maturity, the country's external debt remained predominantly medium- and long-term (MLT), or those with original maturities greater than one year, accounting for 87.2% of the total.

Short-term accounts, or those with original maturities of up to one year, comprised the 12.8% balance of debt stock and consisted of bank liabilities, trade credits, and others. 

Public sector external debt increased to $67.4 billion, or by $3.4 billion, as of end-March 2022 from $63.9 billion as of end-December 2021. 

About $58.8 billion or 87.3% of public sector obligations, were NG borrowings, while the remaining $8.5 billion pertained to loans of government-owned and controlled corporations, government financial institutions, and the BSP.

Private sector debt slightly declined from $42.5 billion as of end-2021 to $42.4 billion as of end-March 2022, with its share of the total likewise decreasing from 39.9% to 38.6%. 

The contraction was due to a decrease in the liabilities reported by banks by $2.0 billion and an increase in resident investments in Philippine debt papers issued offshore of $663 million.

The major creditor countries were Japan ($14.5 billion), the United Kingdom ($3.7 billion), and the Netherlands ($2.9 billion). 

Loans from official sources—multilateral and bilateral creditors—had the largest share at 37.8% of total outstanding debt, followed by borrowings in the form of bonds/notes at 34.6% and obligations to foreign banks and other financial institutions at 21.5%.

The rest, or 6.1%, was owed to other creditors, mainly suppliers or exporters.

In terms of currency mix, the country’s debt stock remained largely denominated in US dollars at 55.4% and Japanese yen at 9.2%.

Multi-currency loans from the World Bank and Asian Development Bank represented 20.8% of the total. 

The 14.7% balance pertained to 14 other currencies, including the euro, Philippine peso, and Special Drawing Rights. —VBL, GMA News