MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) recorded a $1.4-billion decline in the country’s foreign debt burden to only $52.5 billion at the end of the first quarter from $53.9 billion at the end of December last year.Data from the BSP indicated that on an annual basis, the country’s foreign debt stock dropped by nearly four percent to $2.1 billion from $54.6 billion in March 2008.
External debt refers to all types of borrowings by Philippine residents from non-residents that were approved and registered by the BSP.
BSP Governor Amando M. Tetangco Jr. said major external debt indicators remained at prudent levels in the first quarter of the year.
According to the BSP, the gross international reserves (GIR) stood at $39 billion at the close of the quarter bringing the ratio of reserves to short-term external debt to six based on original maturity, from 5.4 in December last year, and maintaining a comfortable level of 3.4 based on remaining maturity.
Short-term accounts under the second concept pertain to obligations with original maturities of one year or less, plus amortizations on medium and long-term accounts falling due within the next 12 months.
Expressed as a proportion of the country’s total outstanding foreign debt to the gross national product (GNP), Tetangco said there was also a moderate improvement.
During the first quarter, a moderate improvement was noted from 29 percent to 28.8 percent. The present ratio, Tetangco said, was also much lower than the 32.6 percent recorded a year ago.
Using gross domestic product (GDP), the ratio remained stable at 32.3 percent since end-2008.
As an indicator of solvency, the BSP said the ratios have been observed to be generally declining since 2002, and were currently at their lowest levels since their peak in 1986 when they reached 99.8 percent for debt to GNP and 97.7 percent for debt to GDP.
The external debt service ratio (DSR), on the other hand, was estimated at 10.3 percent during the first quarter, slightly higher than the 9.6 percent recorded in December 2008 and 9.8 percent in March 2008.
This ratio related the total principal and interest payments to income receipts from the exports of goods and services as well as income (which include remittances by overseas Filipino workers).
This, in particular, is a measure of liquidity, or the adequacy of the country’s foreign exchange earnings to meet maturing principal and interest payments. It has consistently remained below the 20 to 25 percent international benchmark, Tetangco said.
The BSP also reported that the $1.4 billion contraction in debt stock during the first quarter resulted from the $1.3 billion negative foreign exchange evaluation adjustment largely on account of the weakening of the Japanese yen against the dollar.
The currency of reporting for Philippine external debt statistics is the dollar and the debt stock is revalued using exchange rates as of end of the report quarter.
Residents’ investments in Philippine debt papers issued abroad increased by about $540 million during the quarter, correspondingly reducing the external debt stock. This was, however, partially negated by net availment of foreign borrowings of less than $270 million, and upward audit adjustments of more than $200 million. –Des Ferriols, Philippine Star
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