RP external debt down 1% to $53.3 billion

MANILA, Philippines – The country’s external debt slipped by 1.1 percent last year as the debt payments of the National Government and private enterprises exceeded fresh borrowings, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando M. Tetangco Jr. said in a statement that the country’s outstanding external debt reached $53.3 billion or 33.1 percent of gross domestic product (GDP) in 2009, down by $601 million from $53.9 billion or 32.1 percent of GDP registered in 2008.

Data released by the BSP yesterday showed that this was the first time since 2003 that the external debt to GDP ratio increased as the growth of the country’s domestic output as measured by the GDP eased to 0.9 percent last year from 3.8 percent in 2008. The country’s external debt ratio has generally been on a downtrend since 2003 when it reached 72.1 percent down to 32.3 percent in 2008.

The country’s external debt to GDP ratio peaked in 1986 at 97.7 percent of GDP. External debt refers to all types of borrowings by Philippine residents from non-residents that were approved or registered by the BSP.

Tetangco pointed out that net repayment of banks including the BSP and other private sector borrowers negated the net inflows from non-bank public sector borrowings resulting to a lower debt stock last year.

He added that increased resident investments in Philippine debt papers issued abroad as well as the downward foreign exchange revaluation adjustments helped offset the impact of new borrowings on the country’s debt stock.

For 2009, public sector external debt went up by $1.5 billion to $41.8 billion from $40.3 billion primarily due to the net new borrowings obtained to finance development projects and other requirements of the National Government while the debt stock of the private sector retreated by $2.1 billion to $11.4 billion from $13.5 billion as repayments by both bank and non-bank borrowers exceeded loan availments.

The BSP chief pointed out that major external debt indicators continued to improve in 2009 due to the country’s comfortable level of international reserves and sustained growth in national income.

“Major external debt indicators remained at prudent levels by the end of the year,” Tetangco stressed.

He explained that the country’s gross international reserves (GIR) reached a record level of $44.2 billion in 2009 or 17.7 percent higher than the $37.55 billion recorded in 2008.

He added that the ratio of GIR to short-term external debt improved to 11.1 percent in 2009 from 5.4 percent in 2008 under the original maturity concept and to 5.2 percent from 3.4 percent under the remaining maturity concept primarily due to higher reserves and lower short-term obligations.

According to him, the BSP also saw further improvement in the external debt service ratio (DSR) which was estimated at 10.4 percent in 2009 from 9.76 percent in 2008 due to the decline in foreign exchange receipts brought about by the global economic slowdown.

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. –Lawrence Agcaoili (The Philippine Star)