By Lee C. Chipongian
The Philippines’ external debt slightly declined to $72.2 billion as of end-June this year, or down by 0.4 percent from same time last year of $72.5 billion due to some loan repayments and foreign exchange (FX) adjustments, the Bangko Sentral ng Pilipinas (BSP) said Friday.
BSP Governor Nestor A. Espenilla Jr., in a statement, said the external debt “has continued to decline in recent years (from $77.7 billion as of end-2014 to $72.2 billion in end-June 2018) which may be attributed to prudent debt management and Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize FX risk.”
About 61.5 percent of the country’s debt stocks are in US dollar. Another 12.9 percent are denominated in Japanese yen. The US dollar-denominated multi-currency loans from the World Bank and Asian Development Bank, in the meantime, account for 14.6 percent share to total, while the remaining 11 percent of external debt are denominated in 17 other currencies, including in the local currency, Euro and the International Monetary Fund’s special drawing right or SDR.
The BSP pointed to several offsetting factors why the external debt fell by $294 million year-on-year, such as a net principal repayments amounting to $2.4 billion during the first-half. These are mostly the private sector’s short-term bank liabilities.
The decline in outstanding debt was also due to prior periods’ adjustments which amounted to $1.8 billion due to late reporting, as well as the transfer of Philippine debt papers amounting to $419 million from residents to non-residents.
The country’s external debt remains manageable in the second quarter. It dropped more significantly by 1.4 percent compared to the end-March of $73.2 billion, or by 997 million.
In the second quarter, the BSP said the decline in debt stock was mainly because of the following: negative FX revaluation adjustments amounting to $720 million as the US dollar strengthened against third currencies, particularly the Japanese yen ($454 million); the decrease in non-resident investments by $309 million in Philippine debt papers; and net principal repayments of $246 million.
In terms of debt profile, as of end-June the maturity profile is still predominantly medium- to long-term or 83.2 percent of total. These are loans with maturities longer than one year.
Short-term loans or those with maturities of up to one year such as bank liabilities and trade credits, accounted for 16.8 percent.
The weighted average maturity of medium to long-term accounts stood at 17.1 years, with public sector borrowings having a longer average term of 22.6 years compared to 7.9 years for the private sector, said the BSP. “This means that FX requirements for debt payments are well spread out and, thus, more manageable,” it added.
About 33.1 percent or $23.9 billion of external debt are loans from official sources such as multilateral and bilateral creditors.
Around 30.7 percent are foreign holders of bonds and notes, 29.3 percent are obligations to foreign banks and other financial institutions.
The rest or seven percent were owed to other creditor types such as suppliers/exporters.
“The creditor mix continues to be well diversified, demonstrating the country’s ability to tap varied sources of financing (both official and commercial sources), which gives the country sufficient flexibility to choose from a broad range of fund sources,” said the BSP.