MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the country’s outstanding external debt increased by 9.6 percent in the first half of the year due to the upward foreign exchange revaluation adjustment from the continued weakening of the US dollar as well as the recording of the $1.2-billion special drawing rights (SDR) from the International Monetary Fund (IMF).
BSP Governor Amando M. Tetangco Jr. said in a statement that outstanding external debt approved or registered by the BSP amounted to $57 billion as of end-June this year or $5 billion more than the $52 billion booked in the same period last year.
Tetangco said the debt level increased as the National Government borrowed $4.5 billion more from foreign creditors and due to the upward foreign exchange revaluation adjustment amounting to $767 million in the first semester of the year.
“Since the outstanding debt is translated to US dollar on report date, upward revaluation adjustment is incurred whenever the US dollar weakens against other currencies such as the Japanese Yen, and vice versa,” he added.
However, he pointed out that additional investments in Philippine bonds and notes issued abroad reduced the country’s external debt stock by $407 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.
The BSP chief explained that the debt stock as of the first half of the year already included that country’s total share amounting to $1.2 billion outstanding allocation of SDRs from the IMF as these are now treated as long-term liabilities in conformity with the guidelines outlined in its new balance of payments manual.
Likewise, the debt to gross national product (GNP) ratio improved to 28.5 percent from 28.9 percent while the debt to gross domestic product (GDP) ratio also improved to 32.7 percent from 32.8 percent.
“Major external debt indicators remained at prudent levels at the end of the second quarter,” Tetangco said.
He added that the external debt service ratio (DSR) was estimated at 9.0 percent as of the first half of the year from 10.6 percent in the same period last year 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.
Furthermore, the external debt profile remained predominantly medium to long-term in nature or those with maturities longer than one year accounting for about 90.4 percent of the country’s total external debt. The weighted average maturity of medium to long-term debt was 22.2 years.
“The larger share of medium to long-term accounts to the total means that loan repayments are spread out over a longer period of time, resulting in a more manageable level of debt payments,” Tetangco explained.
Total public sector external debt went up by $259 million to $44.1 billion as of end-June from $43.9 billion as of end-March this year while private sector external debt grew by $43 million to $12.9 billion from $12.85 billion.
US dollar-denominated accounts cornered a 50.23 percent share of the country’s total external debt followed by the Japanese Yen with 28.8 percent while multi-currency loans from international lenders including the Asian Development Bank (ADB), the World Bank, among others accounted for 10.8 percent.
The rest of the accounts comprising the 10.2 percent balance were denominated in 18 other currencies.
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 7.93 percent in the first half of the year from 1.2 percent in the same period last year. The Philippines escaped recession last year after its GDP grew by 1.1 percent last year from 3.8 percent in 2008. –Lawrence Agcaoili (The Philippine Star)
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