By Lee C. Chipongian
The country’s outstanding external debt as of end-June this year was down by 6.7 percent or $5.2 billion year-on-year to $72.5 billion partly due to loan prepayments, according to Bangko Sentral ng Pilipinas (BSP) Officer-In-Charge Diwa C. Guinigundo.
On a quarter-on-quarter basis, external debt declined by 1.8 percent or $1.3 billion from $73.8 billion end-March.
Guinigundo in a statement said “all key external debt indicators remained at comfortable levels during the second quarter.” External debt is equivalent to 23.5 percent of GDP compared to the previous year’s 26.2 percent.
The external debt ratio which is a solvency indicator, also improved to 19.5 percent of annual aggregate output from 21.7 percent last year.
External debt includes all types of borrowings by residents from non-residents. It is the outstanding amount of actual current, and not contingent, liabilities that require payments of interest and/or principal at maturity.
Guinigundo said the debt stock declined year-on-year because of the following: from a $2.7-billion net principal repayments by both the public and private sectors during the period; and previous periods’ adjustments which was a negative $1.4 billion due to late reporting.
He said foreign debt also decreased on a stronger US dollar versus other currencies including the peso and the yen.
Negative foreign exchange revaluation adjustments were particularly recorded at $1.2 billion as of end-June. About 62.8 percent of external debt are in US dollar and 12.8 percent in yen.
As for the second quarter, the decline in debt stock was due to a $1.2-billion net repayment mostly by the private sector and a $110-million increase in residents’ investments in Philippine debt papers issued abroad.
Guinigundo said the country’s hefty gross international reserves represents 5.6 times cover for short-term debt under the original maturity concept.
As of end-June, he said the debt service ratio likewise improved to 6.6 percent compared to 8.8 percent in end-March due to higher receipts and lower payments during the 12-month period.
The ratio – a measure of the country’s foreign exchange earnings and both private and public sectors’ capacity to meet maturing obligations – has consistently remained well below the international benchmark range of 20 percent to 25 percent.
According to the BSP, external debt is predominantly 79.9 percent medium- to long-term (MLT) loans.
“This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable.” MLT accounts are those with maturities longer than one year.
Public sector external debt accounted for 51.7 percent of the total or $37.5 billion while private sector debt amounted to $35 billion or about 48.3 percent of the total.
About $23.7 billion of loans are from multilateral and bilateral creditors while another $23.7 billion are loans from foreign banks and other financial institutions, both accounting for 32.7 percent each.
A total of $20.3 billion are borrowings in bonds and notes held by non-residents and $4.8 billion from foreign suppliers/exporters, accounting for 28.1 percent and 6.6 percent respectively, of total external debt.