The Philippines’ foreign debt stock grew by $2.3 billion, or 3.1 percent, in the first quarter of 2016 compared with a year earlier, mainly on net availments and revaluation adjustments offset by some decline in foreign investments, central bank data showed over the weekend.
Foreign debt in the first quarter was also higher than the previous quarter, due mainly to exchange rate adjustments from a weaker US dollar and increased investment in local securities, it added.
External debt is the overall borrowing tally of Philippine residents from non-residents or foreign individuals, companies and organizations.
The Bangko Sentral ng Pilipinas (BSP) said outstanding Philippine external debt stood at $77.6 billion at end-March 2016, $2.3 billion higher than the $75.3 billion recorded in the first three months of 2015, and $166 million higher than the $77.5 billion registered at the fourth quarter of last year.
Year-on-year, growth in the debt stock was due to net availments, or excess drawings over debt payments ($2.1 billion), and foreign exchange revaluation and other adjustments in previous periods ($1.7 billion), which were partially offset by the $1.4-billion decline in non-resident investments in Philippine debt papers, the BSP said.
The quarter-on-quarter increase, meanwhile, was attributed to foreign exchange revaluation adjustments ($814 million) as the US dollar weakened, particularly against the Japanese yen, previous periods’ adjustments, and increased investments in Philippine debt papers by non-resident investors (US$833 million).
“Net repayments of $1.5 billion, mainly by banks, partly mitigated the upward impact of these developments on debt stock,” the BSP said.
“Key external debt indicators remained at very comfortable levels in the first quarter of 2016,” BSP Governor Amando Tetangco Jr. was quoted as saying, noting that the gross international reserves stood at $83 billion as of end-March.
According to the central bank, the external debt ratio—or the total outstanding debt expressed as a percentage of the annual aggregate output —remained at the end-2015 level of 21.9 percent; using gross domestic product (GDP) as denominator, the ratio was likewise unchanged at 26.5 percent even as the economy posted a 6.9 percent growth in the first quarter of 2016 (from 5.0 percent in the previous quarter).
This means that even though the external debt level grew during the reference period, it did not grow at a rate faster than the overall economy.
The country’s debt service ratio (DSR) however increased to 5.9 percent from 5.3 percent in 2015, but remained well below the international benchmark range of 20 percent to 25 percent.
The DSR is a measure of the adequacy of the country’s foreign exchange earnings to meet obligations through relating principal and interest payments to exports of goods and receipts from services and primary income.
About 81.6 percent of the Philippines’ external debt is in medium- to long-term tenored debt instruments, or those with maturities of more than one year.
The BSP said this means that foreign exchange requirements for debt payments are well spread out and more manageable.
Of the $77.6-billion foreign debt in the first quarter of 2016, about 50.1 percent or $38.9 billion of it came from the public sector — primarily government borrowings – while the rest of the balance or $38.7 billion is from the private sector, or banks and companies alike.
About 32.6 percent of the outstanding foreign obligation is due to foreign banks and other financial institutions, followed by 31.5 percent for multilateral and bilateral creditors, 29.4 percent is in the form of bonds or notes, while the 6.5 percent balance is owed to foreign suppliers and exporters.
In terms of currency ratios, 63 percent of the foreign debt at end-March was US dollar-denominated, followed by the Japanese yen (12.4 percent), multi-currency loans from international lenders World Bank and the Asian Development Bank (12.5 percent), and various obligations in 17 other currencies (12.1 percent).