Foreign debt rises 9.5% to $60.1 B

MANILA, Philippines – The country’s foreign debt rose by 9.5 percent to $60.1 billion in 2010 on the back of higher government and private sector borrowings as well as upward foreign exchange revaluation, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said in a statement that the country’s outstanding external debt reached $60.1 billion last year or $5.2 billion higher than the $54.9 billion in 2009 due to higher public and private sector borrowings as well as the continued strengthening of the peso and other third currencies against the dollar.

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

Public sector borrowing consisting of investments by residents in Philippine bonds and notes issued overseas reached $46.2 billion or 76.7 percent of the total external debt level last year while private sector borrowings stood at $13.9 billion for a 23.3 percent share.

Tetangco traced the increase to the net availments of both the public and private sectors amounting to $4 billion and the $1.8 billion upward foreign exchange revaluation adjustments that was partially mitigated by the increased investments in Philippine bonds and notes issued offshore.

Upward revaluation adjustment is incurred whenever the US dollar weakens against other currencies such as the Japanese Yen since the outstanding debt is translated to the dollar.

Despite the increase, he pointed out that the external debt to GDP ratio improved to 31.8 percent last year from 34 percent in 2009 while the external debt to gross national product (GNP) ratio improved to 27.8 percent from 29.7 percent.

“Major external debt indicator continued to improve during the fourth quarter,” Tetangco stressed.

Data showed that the country’s gross international reserves (GIR) – the sum of all foreign exchange flowing into the Philippines – surged 41 percent to a record $62.37 billion last year from $44.24 billion in 2009 that is equivalent to 9.9 times the short-term debt based on original maturity and 5.9 times under the remaining maturity concept.

The BSP said the external debt service ratio (DSR) improved to 8.8 percent in 2010 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.

Furthermore, the external debt profile remained predominantly medium to long-term in nature or those with maturities longer than one year accounting for about 89.5 percent of the country’s total external debt. The weighted average maturity of medium to long-term debt was 22.4 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. –Lawrence Agcaoili (The Philippine Star)