Foreign debt down to $53.9 billion

MANILA, Philippines – The country’s external debt fell by $1 billion to $53.9 billion in 2008 from $54.9 billion at the end of 2007 as both the public and private sector prepaid some of their outstanding foreign obligations.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the country’s external debt also fell to 31.9 percent of gross domestic product (GDP) in 2008 from 38.1 percent of GDP in 2007.

The BSP said the country’s external debt ratio has generally been on a downtrend since 2002 and has now fallen to its lowest level since 1986 when it peaked at 97.7 percent of GDP.

The BSP said, however, that the external debt level rose slightly by $374 million in the fourth quarter of 2008 compared with $53.5 billion in the third quarter, mainly because of the depreciation of the peso against the dollar.

External debt referred to all types of borrowings by Philippine residents from non-residents that were approved and registered by the BSP. This covered the borrowings of the public and private sector.

BSP Governor Amando M. Tetangco Jr. said the major external debt indicators continued to improve in 2008 due to the country’s substantial foreign exchange receipts, comfortable level of international reserves, and sustained growth in national income.

“Gross international reserves (GIR) were at a historic high of $37.6 billion at the close of the year,” Tetangco said.

The ratio of GIR to short-term external debt improved to 5.4 in December from 4.4 in September under the original maturity concept, and to 3.4 from three under the remaining maturity concept. 

Tetangco said the BSP also saw further improvement in the external debt service ratio (DSR) which was estimated at 9.6 percent in 2008, from 10 percent in the nine-month period ending September and 10.1 percent in 2007.

This ratio is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing principal and interest payments. Tetangco said it has consistently remained well below the 20 to 25 percent international benchmark.

The BSP reported that there was a slight growth in the debt stock during the fourth quarter of 2008 which was due to the large foreign exchange revaluation adjustments for accounts denominated in Japanese yen which strengthened vis-à-vis the dollar.

For 2008, transactions resulted in net repayments of $4.3 billion, but the impact of this was substantially offset by upward foreign exchange revaluation adjustments of $3.2 billion.

The BSP said this represented the increase in the dollar value of yen-denominated obligations due to the yen’s appreciation versus the dollar. As a result, the debt stock showed a decline of only $1 billion from last year’s $54.9 billion figure. Without the upward revaluation adjustments, the reported said the country’s external debt would have dropped by $4.3 billion during the year.

Prepayments during the 12-month period amounted to $3.4 billion, of which $864 million were made by the public sector.

The BSP said the maturity mix (medium and long-term or MLT/short-term) of the country’s external debt stood at 87:13 by end-2008 and remained biased towards longer-term accounts.

The creditor profile remained largely unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures, accounting for 45.2 percent of the country’s total external debt, followed by foreign holders of bonds and notes (32.2 percent), and foreign banks and other financial institutions (16.8 percent). The rest of the creditors were mostly foreign suppliers and buyers.–Des Ferriols, Philippine Star