PH external debt up 13% to $110bn – Manila Bulletin

To finance government infrastructure projects and Covid-related spending, the Duterte administration borrowed an additional $12.71 billion at the end of March, bringing total external debt outstanding to $109.75 billion. dollars, up 13.09% from $97.05 billion in the same period last year.

Over the weekend, the Bangko Sentral ng Pilipinas (BSP) reported that over the past 12 months, total net revenue was $16.4 billion, of which 12 billion pesos came from the government. National (NG). An additional $3.2 billion was labeled as adjustments to prior periods, which also contributed to the increase in external debt.

The BSP said that what held back a further increase in the stock of debt was the transfer of Philippine debt securities from non-residents to residents, which reached $5.1 billion during the period, as well as than a negative revaluation of $1.8 billion in foreign exchange (FX).

BSP Governor Benjamin E. Diokno said that at $109.75 billion, the country’s outstanding external debt “remains manageable” at 27.5 percent of GDP. This ratio, which is a solvency indicator, is however higher compared to the same period in 2021 by 26.6%.

The BSP said the external debt-to-GDP ratio remains one of the lowest in the ASEAN region and “indicates the country’s strong and enduring position to service foreign borrowing.”

However, external debt still exceeds gross international reserves or the stock of Philippine dollars which at the end of May this year stood at $103.53 billion, the lowest level since October 2020.

Meanwhile, the debt service ratio (DSR) fell to 4.1% from 14.3% in 2021, due to projected lower repayments and higher revenues. The DSR, which links 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 earnings to make against maturing bonds.

External debt, which refers to all types of borrowing by Philippine residents from nonresidents on a quarterly basis, also increased by 3.1% or $3.3 billion, according to data from the BSP.

Net drawdowns of $3.5 billion by government and non-private banks increased the debt stock in the quarter.

The government borrowed $2.3 billion between late December and late March this year to fund its pandemic response programs and infrastructure projects. It has also issued $2.3 billion in global bonds, including its sustainability bond.

Non-bank private sector borrowers drew $995 million during the quarter for working capital and to finance their projects.

The BSP also noted that for the first quarter, several factors contained the increase in outstanding debt, such as prior period adjustments of $1.7 billion and the transfer of Philippine debt securities issued to abroad by non-residents to residents of $1 billion, as well as a negative revaluation of the exchange rate. of $841 million.

At the end of March, public sector debt stood at $67.4 billion, up $3.4 billion from $63.9 billion at the end of December. About 87.3% or $58.8 billion were NG borrowings while the remaining $8.5 billion were loans taken out by state-owned and controlled corporations, government financial institutions, and BSP.

As for the external debt of the private sector, it amounted to 42.4 billion dollars, down slightly from 42.5 billion dollars at the end of 2021.

About 87.2 percent of the country’s external debt maturity profile continues to be dominated by medium and long-term (MLT) loans or loans with an original maturity of more than one year.

Shorter-term accounts or those with an original maturity of less than one year accounted for 12.8% of outstanding debt, mainly bank liabilities, trade credits and others.

“The weighted average maturity of all MLT accounts decreased to 16.9 years from 17.2 years in the previous quarter, with public sector borrowings having a longer average duration of 20.5 years from 7.1 years for the private sector. This means that the foreign exchange needs for debt payment are still well distributed and therefore manageable”, according to the BSP.

The country’s main creditors are Japan with $14.5 billion, the United Kingdom with $3.7 billion and the Netherlands with $2.9 billion.

About 37.8% of external loans came from official sources or from multilateral and bilateral creditors, while 34.6% were issued from bonds or banknotes. A further 21.5% of external debt are obligations to foreign banks and other financial institutions. A small part or 6.1% was due to other creditors such as suppliers/exporters.

Diokno, who is the new secretary of the Ministry of Finance (DOF) under the Marcos administration, said he would focus on reducing the debt-to-GDP ratio and the fiscal deficit-to-GDP ratio under his leadership.

The country’s level of debt to GDP is higher at 63.5%, exceeding the internationally prescribed best practice of 60% of GDP. The DOF said an additional debt of 3.2 trillion pesos will need to be addressed by the end of 2022.

Diokno said earlier that a pandemic-induced increase in debt is inevitable but unlikely to lead to a credit rating downgrade in the future.

The outgoing head of the BSP maintains that the public debt is “quite manageable” and that the country could “easily exceed its debt since we expect the Philippine economy to grow much faster than its debt”.

Regarding external debt, Diokno reiterated that the external debt to GDP ratio is still one of the lowest in the ASEAN trading bloc. This means that external debt service is quite manageable since most of the country’s external debt is medium to long term and has fixed interest rates.

SUBSCRIBE TO THE DAILY NEWSLETTER

CLICK HERE TO JOIN

Shirlene J. Manley