THE Philippines’ foreign debt has dropped 4.6 percent year-on-year and 0.4 percent quarter-on-quarter to $75 billion by end-June, mainly due to revaluation adjustments, the Bangko Sentral ng Pilipinas (BSP) said over the weekend.
The comparative level for the end of the first quarter was $75.3 billion, BSP data shows.
The BSP traced the quarter-on-quarter decline to the transfer of Philippine debt papers by non-residents to residents ($1.0 billion) amid concerns at the time about an interest rate hike by the Federal Reserve.
The decline was also seen resulting from the negative foreign exchange revaluation adjustments ($162 million) due to the weakening of the Japanese yen against the US dollar. Japan had allowed the yen to depreciate as a way of helping its exports become more competitive and revive the economy in the process.
However, the impact of these developments was partially offset by a net availment of $875 million, mainly by the national government, the BSP said.
Year-on-year, the debt-stock dropped because of the foreign exchange revaluation amounting to $2.6 billion as the US economy continued to recover and kept the US dollar strong.
Increased investment in Philippine debt papers ($835 million), coupled with previous adjustments that trimmed up to $134 million, also contributed to the decline in the debt level, the central bank said.
External debt consists of all borrowings by Philippine residents from non-residents, following the residency criterion for international statistics such as the balance of payments.
Key external debt indicators have remained at prudent levels in the second quarter of 2015, the central bank noted.
The gross international reserves (GIR) of $80.6 billion as of end-June could cover up to 6.1 times of short-term debt based on original maturity.
The external debt ratio or outstanding external debt as a percentage of total output (gross national income or GNI) reflects an improved trend at 21.3 percent in the second quarter of 2015 from 21.5 percent in the first quarter and 23.5 percent a year earlier.
“The same trend was observed using the GDP as denominator, with the Philippine economy growing by 5.6 percent during the second quarter of 2015,” the central bank said.
The ratio is an indicator of the country’s capacity to service foreign obligations.
The external debt service ratio (DSR) or the ratio of total principal and interest payments to total exports of goods and receipts from services and primary income also improved to 5.9 percent in June from 6.2 percent in March 2015 and 6.9 percent a year earlier.
The DSR measures the adequacy of the country’s foreign exchange earnings to meet maturing obligations.