Foreign debt rises 4.4% to $59.8 billion in Q3

MANILA, Philippines – The country’s external debt rose to $59.8 billion as of end-September 2010, 4.4 percent higher than the $57.3 billion recorded as of end-June, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. reported yesterday.

The BSP attributed the increase to the weakening of the dollar against major currencies in which the country’s debt stock is denominated.

“The growth resulted mainly from the weakening of the dollar against major currencies in which the country’s debt stock is denominated, such as the Japanese yen, increasing the outstanding debt in US dollar terms by more than $1.5 billion,” Tetangco said.

Aside from the general weakness of the dollar against major currencies, additional holdings of Philippine debt papers also increased the country’s debt level.

Net new borrowings during the quarter of $788 million and additional holdings of Philippine debt papers by non-residents also contributed $154 million to the increase in debt level.

External debt refers to all types of borrowings by the government and the private sector.

BSP data also showed that on a year-on-year basis, the debt stock grew by $5 billion (or by 9.2 percent) from $54.7 billion in September 2009 as new borrowings exceeded loan repayments by more than $4 billion coupled with upward foreign exchange revaluation adjustment of $1.1 billion.

Increased holdings of Philippine bonds and notes by residents slightly reduced the debt stock by $269 million.

In terms of debt ratios, Tetangco said major external debt indicators remained at prudent levels at the end of the third quarter.

Gross international reserves (GIR) reached $53.8 billion at end-September, resulting in the improvement of the GIR to short-term debt ratio under both original and remaining maturity indicators.

According to BSP indicators, short-term accounts under the remaining maturity 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 or from Oct. 2010 to Sept. 2011.

“With the increase in GIR, reserves are now equivalent to 9.4 times the level of short-term external debt based on original maturity compared to 8.9 times in end-June 2010, and 8.4 times a year ago. Under the remaining maturity concept, the ratio showed the same trend, increasing to 5.5 from 4.9 as of end-June 2010 and 4.4 times last year, which are substantially higher than the international benchmark of one,” Tetangco said.

At the current GIR level, Tetangco said this could fully cover total outstanding external debt of $59.8 billion that have been recorded with the BSP as of the third quarter of the year.

In terms of debt profile, total public sector external debt increased to $46.4 billion, or by $2.2 billion from the second quarter level of $44.2 billion, primarily due to upward foreign exchange revaluation adjustments of $1.5 billion, the BSP chief also said.

Private sector external debt, meanwhile, grew by $344 million to $13.4 billion due to borrowings by banks. -Iris C. Gonzales (The Philippine Star)