Debt prepayments more than double

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pix_b1Debt prepayments by both public and private borrowers were up markedly as of end-September last year, a development an analyst said could be a sign of caution given external developments.

Prepayments on medium and long-term foreign loans, the Bangko Sentral ng Pilipinas (BSP) reported, hit $2.342 billion over January to September 2015, up 110 percent from to the $1.113 billion recorded in the same 2014 period.

The data pertains to foreign-denominated debt payable in five years that was settled ahead of schedule. Prepayment is done to make debts more manageable and the central bank has said that doing so for foreign loans would be a prudent exercise when the local currency showed strength.

The public sector—which includes the national and local governments as well as state-owned and -controlled corporations—accounted for the bulk of the prepayments.

Public sector prepayments totaled $1.466 billion for the period, 53 percent higher than the $953.7 million prepayments recorded a year earlier.


Private corporations, meanwhile, prepaid a total of $875.2 million, 448 percent higher than the $159.7 million seen in 2014.

“I think it’s a sign that corporates are very much aware of the possible changes in the global environment,” said Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands.

He pointed out that interest rates remained relatively low and exchange rates stable. Prepaying loans could mean corporates were trying to whittle down debt or pay it off altogether in anticipation of possible changes to the downside, Mapa noted.

“Before rates begin to rise fast or the peso depreciates substantially, it may be best to make payments while times are still good. It would make for smoother sailing if things do turn for the worse,” he said.

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