THE Philippines’ foreign debt dropped to $75.3 billion at the end of March this year, down by $3.6 billion or 4.6 percent from a year earlier mainly due to revaluation adjustments and net repayments, the Bangko Sentral ng Pilipinas (BSP) said.
Compared to the previous quarter, the country’s foreign debt declined by 3 percent from the $77.7 billion recorded in the last quarter of 2014, the BSP said.
The BSP explained that the quarter-on-quarter decline was attributed to net repayments ($2 billion), mainly by banks, negative foreign exchange revaluation ($220 million) arising from the strengthening of the US dollar against other currencies, and an increase in residents’ investments in Philippine debt papers ($100 million).
On a year-on-year basis, the decline in the debt stock was attributed to negative foreign exchange revaluation adjustments ($2.2 billion); net repayments ($1.9 billion); and previous periods’ adjustments (negative $220 million) due to audit findings as well as late reporting of transactions.
However, the central bank said the downward pressure of these developments on the debt level was mitigated by the increase in non-residents’ investments in Philippine debt papers which rose to $704 million.
External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics, such as the balance of payments.
The central bank said key external debt indicators were observed to have remained at very prudent levels in the first quarter of 2015.
It said gross international reserves (GIR) of $80.5 billion as of March represented cover for short-term debt of 6.1 times under the original maturity concept.
The external debt ratio or outstanding external debt as a percentage of aggregate output (gross national income or GNI) continued to reflect an improving trend and was recorded at 21.5 percent in the first quarter of 2015 from 22.5 percent last quarter and 23.9 percent a year ago.
“The same trend was observed using GDP as denominator, as the debt stock dropped by $2.4 billion vis-à-vis the 5.2 percent growth of the Philippine economy in the first quarter of 2015,” it said.
External debt ratio is an indicator of the country’s capacity to service foreign obligations.
The BSP added that the external debt service ratio (DSR), or the ratio of total principal and interest payments relative to total exports of goods and receipts from services and primary income, also further improved to 6.3 percent in March from 6.4 percent in December 2014 and 7.3 percent a year ago.
DSR is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing obligations.