The country’s foreign debt stock fell to $72.5 billion in the second quarter of 2017, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, down $5.2 billion from a year earlier.
Compared to the previous quarter, outstanding external debt was $1.3 billion less, largely due to $1.2 billion in net repayments – mostly by the private sector – and a $110-million increase in residents’ investments in Philippine debt papers issued offshore.
The year-on-year drop, meanwhile, was traced net principal repayments totaling $2.7 billion, audit adjustments for previous periods that amounted to a negative $1.4 billion due to late reporting, and negative foreign exchange revaluation adjustments worth $1.2 billion arising from the strengthening of the US dollar.
Key external debt indicators remained at comfortable levels during the second quarter of 2017, the Bangko Sentral said, noting that the country’s gross international reserves stood at $81.3 billion as of end-June, enough for 5.6 times short-term (ST) debt under the original maturity concept.
The external debt ratio—or the total outstanding debt expressed as a percentage of the annual aggregate output—stood at 19.5 percent, improving from 21.7 percent a year earlier.
“The same trend was observed using GDP (gross domestic product) as denominator, with the Philippine economy growing by 6.5 percent in the second quarter of 2017,” the Bangko Sentral said.
The country’s debt service ratio (DSR) also improved to 6.6 percent from 7.5 percent. It also decreased from 8.8 percent as of end-March and was well below the international benchmark range of 20 percent to 25 percent.
The debt service ratio is a measure of the country’s adequacy to meet its obligations, based on foreign exchange earnings, by relating principal and interest payments to merchandise exports and receipts from services and primary income.
About 79.9 percent of the Philippines’ external debt is medium to long-term in nature with maturities of more than one year. This means that foreign exchange requirements for debt payments are well spread out and more manageable, the central bank said.
Govt debt vs private debt
Of the $72.5-billion in foreign debt as of the second quarter, 51.7 percent or $37.5 billion, was owed by the public sector. The remainder was contracted by banks and companies.
Loans from multilateral and bilateral creditors, and foreign banks and other financial institutions comprised the largest shares of total outstanding debt at 32.7 percent each.
Borrowings in the form of bonds/notes held by non-residents accounted for 28.1 percent, while the rest was mostly owed to foreign suppliers/ exporters.
By currency, 62.8 percent of the foreign debt was US dollar-denominated, 12.8 percent was in Japanese yen, 13.9 percent in multi-currency loans the World Bank and the Asian Development Bank, and 10.5 percent were obligations in 17 other currencies.