The country’s foreign debt stock grew by $2.7 billion, or 3.6 percent, in the second quarter of 2016 compared with a year earlier, mainly on foreign exchange revaluation and net availments, central bank data showed Friday.
Foreign debt in the second quarter was also higher than the previous quarter, due mainly to exchange rate adjustments from a weaker US dollar.
External debt is the overall borrowing 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 $77.7 billion as of end-June 2016, $2.7 billion higher than the $75 billion recorded in the first six months of 2015, and $81 million higher than the $77.6 billion registered at the first quarter of this year.
Year-on-year, the debt stock grew as a result of foreign exchange revaluation, and other adjustments in previous periods ($2.6 billion), as well as net availments ($61 million).
“A $424 million decline in non-resident investments in Philippine debt papers issued offshore partly mitigated the upward trend in debt stock,” according to the central bank.
The quarter-on-quarter increase was attributed to “foreign exchange revaluation adjustments ($821 million) as the US dollar weakened, particularly against the Japanese yen, the impact of which was offset by net repayments ($680 million), previous periods’ adjustments due to late reporting ($44 million) and lower non-resident holdings of Philippine debt papers ($17 million).
“[K]ey external debt indicators remained at comfortable levels in the second quarter of 2016,” BSP Governor Amando Tetangco Jr. was quoted as saying, noting that the country’s gross international reserves stood at $85.3 billion as of end-June.
According to the central bank, the external debt ratio – or the total outstanding debt expressed as a percentage of the annual aggregate output – stood at 21.7 percent, higher than the 21.3-percent level recorded a year earlier. Using the gross domestic product (GDP) as denominator, the ratio was also higher at 26.2 percent from 25.7 percent, even as the economy posted a 7-percent growth in the second quarter of 2016 (from 5.9 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 slightly to 6.2 percent from 5.9 percent in 2015, but stayed well below the international benchmark range of 20 percent to 25 percent.
The DSR 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 81.3 percent of the external debt is in medium- to long-term debts with maturities of more than one year.
The BSP noted this means that foreign exchange requirements for debt payments are well spread out and – thus – manageable.
Of the $77.7-billion foreign debt in the second quarter of 2016, about 50.7 percent or $39.4 billion was owed by the public sector – primarily government borrowings – while the rest or $38.4 billion was contracted by the private sector, or banks and companies.
About 32.6 percent of the outstanding foreign obligation is owed to foreign banks and other financial institutions, 31.7 percent to multilateral and bilateral creditors. Around 29.1 percent is in the form of bonds or notes, while 6.6 percent is owed to foreign suppliers and exporters.
In terms of currency ratios, 63 percent of the foreign debt was US dollar-denominated, 12.5 percent in Japanese yen, 12.5 percent in multi-currency loans from international lenders World Bank and the Asian Development Bank, and 10.9 percent was from various obligations in 17 other currencies.