RP foreign debt dips to $53.5B as of Q3

The country’s outstanding foreign debt dropped $1.3 billion to $53.5 billion at the end of the third quarter, from $54.8 billion at the end of June, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.

The BSP tracks external debt which includes all types of borrowings of Philippine residents owed to non-residents that were approved and/or registered by the central bank.

The BSP said there were improvements in the major external debt ratios due mainly to the overall drop in the total external debt stock.

“The decline in external debt stock was also accompanied by a continuing improvement in the country’s external debt related ratios,” BSP Governor Amando M. Tetangco Jr. said.

First, Tetangco said the external debt ratio, or total outstanding debt as a percentage of the country’s gross national product (GNP), declined to 28.9 percent, from 36.8 percent in September 2007 and 35 percent in December 2007.

In terms of gross domestic product (GDP), Tetangco said the external debt ratio also improved to 31.8 percent, from 40.2 percent in September 2007 and 38.1 percent in December 2007.

Since 2002, the BSP said the ratio has generally traced a downward trend, indicating a sustained improvement in the country’s capacity to service its maturing foreign obligations.

According to the BSP, the external debt service ratio (DSR) was estimated at 10.1 percent during the period January to September 2008, lower than the 10.5 percent recorded during the same period last year.

This ratio represents the percentage of total principal and interest payments to total exports of goods and receipts from services and income (which include remittances of overseas Filipino workers).

The BSP reported that the DSR has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period.

The BSP said the gross international reserves (GIR), which stood at $36.7 billion as of end-September 2008, rose to the equivalent to 4.4 times (from 4.2 times last  quarter) the level of short-term debt based on the original maturity concept.

The BSP said the substantial reduction in the debt stock during the third quarter was due to the overall net principal repayments posted by both the public and private sectors, amounting to a total of $1.3 billion.

The BSP said this amount included prepayments of $511 million during the period, made primarily by the National Power Corp. (NPC).

Year-on-year, the debt stock declined by $945 million also as a result of net principal repayments which reached $3.3 billion.

The BSP said these repayments were partially offset by the upward foreign exchange revaluation adjustments ($1.5 billion), mainly reflecting the increase in the dollar equivalent of loans denominated in Japanese yen.

The BSP said there was also an increase in the holdings of Philippine debt papers by non-residents ($442 million); and the upward audit adjustments ($404 million).

Prepayments on external debt accounts during the 12-month period ending September 2008 totaled US$1.8 billion. Major portions of these prepayments were made by the NPC, private commercial banks for their tier 2 capital issues and other major private borrowers across various sectors.

The BSP said the maturity profile of the country’s external debt remained predominantly medium to long term, which accounted for 84.5 percent of the total.

These loans have original tenors of more than one year and had a weighted average maturity of 19.8 years, longer than the 18.9 years recorded at end-2007.

The BSP said the public sector borrowings had an average term of 21.6 years, much longer than the private sector’s 11.7 years. Short-term external debt (mostly inter-bank borrowings and import obligations) represented 15.5 percent of the total.

Total consolidated public sector external debt declined by $0.4 billion quarter on quarter to $38.3 billion as of end-September 2008.Its share to total, however, increased to 71.7 percent, from 70.6 percent due to the lower net repayments posted by the public sector compared to the private sector.

Private sector external debt dropped by nearly $1 billion to $15.1 billion, from US$16.1 billion in June 2008; its share to total also dropped to 28.3 percent, from 29.4 percent.–Des Ferriols, Philippine Star