Foreign debt climbs 5.6% to $55.4 billion in first quarter

MANILA, Philippines – The country’s external debt went up by 5.6 percent as of the first quarter of the year due to higher borrowings by private enterprises and the National Government, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP officer-in-charge Diwa Guinigundo said the country’s outstanding external debt reached $55.4 billion or 33.2 percent of the country’s gross domestic product (GDP) as of end-March this year.

Guinigundo said the amount was also $2.2 billion or 4.1 percent higher than the end 2009 level of $53.3 billion or 33 percent of GDP.

“Major external debt indicators remained at prudent levels by the end of the first quarter,” the BSP deputy governor stressed.

He pointed out that the growth resulted from net borrowings of the private sector amounting to $1.5 billion and the public sector with $925 million.

External debt refers to all types of borrowings by the Philippine residents from non-residents that were approved or registered by the central bank.

Last year, the country’s outstanding external debt slipped by 1.1 percent to $53.3 billion or 33.1 percent of GDP in 2009 from $53.9 billion or 32.1 percent of GDP registered in 2008.

The country’s external debt to GDP ratio peaked in 1986 at 97.7 percent of GDP but has generally been on a downtrend since 2003 when it reached 72.1 percent down to 32.3 percent in 2008 before picking up slightly to 33 percent in 2009.

The country’s GDP zoomed to its fastest level in almost two years after expanding by 7.3 percent in the first quarter of the year from 0.5 percent in the same quarter last year. The Philippines escaped recession last year after its GDP grew by 0.9 percent last year from 3.8 percent in 2008.

Total public sector external debt went up by $769 million to $42.6 billion as of end-March from the end-2009 level of $41.8 billion due to the net new borrowings of $925 million to finance development projects and other requirements of the National Government.

The debt stock of the private sector increased by $1.4 billion to $12.8 billion due to net loan availments of $1.5 billion.

Guinigundo said the external debt service ratio (DSR) was estimated at 10.3 percent as of the first quarter of the year from 10.4 percent in 2009 and well below the 20 percent to 25 percent international benchmark indicating that the Philippines has sufficient foreign exchange earnings to service maturing principal and interest payments.

The DSR is the percentage of total principal and interest payments to total exports of goods and receipts from services and income. It is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing principal and interest payments.

The BSP official explained that the external debt profile remained predominantly medium to long-term in nature accounting for about 90.6 percent of the country’s total external debt. The weighted average maturity of medium to long-term debt was 20 years. –Lawrence Agcaoili (The Philippine Star)