End-Dec 2.5% higher than end-Sept; full-year debt down
The Philippines’ foreign debt stock grew by $1.9 billion, or 2.5 percent, in the fourth quarter of 2015 against a year earlier, as local banks and corporations took advantage of robust economic conditions to seek additional financing, the central bank announced Monday.
Despite the fourth quarter increase, however, the year-end total of foreign debt declined slightly from the previous year due mainly to exchange rate adjustments from a stronger US dollar and increased investment in local securities, it added.
In a statement on Monday, the Bangko Sentral ng Pilipinas (BSP) said the outstanding Philippine external debt stood at $77.5 billion at the end of 2015, $1.9 billion higher than the $75.6 billion recorded in the first three quarters of 2015, but $200 million lower than the $77.7 billion registered at the end of 2014.
The debt grew in the fourth quarter as various private banks and corporates preferred to borrow capital through foreign denominated debt instruments — with net availments reaching $1.8 billion — for financing their various ongoing projects amid a robust local economic climate, the BSP said.
External debt is the overall borrowing tally of Philippine residents from non-residents or foreign individuals, companies and organizations.
The BSP said that the year-or-year difference leading to a lower net compared with 2014 was attributable to $456 million in negative foreign exchange valuation adjustments, due to a stronger US dollar throughout most of 2015, and a $1.8 billion increase in investments of residents, mainly banks, in Philippine debt papers.
“A stronger dollar results in a lower debt figure expressed in US dollar terms,” BSP Governor Amando M. Tetangco Jr. was quoted as saying.
“Key external debt indicators remained at comfortable levels at the close of the year,” he added, noting that the gross international reserves stood at $80.7 billion as of end-2015.
Despite the year-on-year reduction in foreign debt, the BSP said the downward impact on foreign debt in 2015 “was partly negated” by $2 billion in additional debt composed of $1.8 billion net availments and $200 million in audit adjustments for the previous period.
According to the central bank, the external debt ratio—or the total outstanding debt expressed as a percentage of the annual aggregate output — also improved to 21.9 percent in 2015 from 22.5 percent in 2014, which the BSP attributed to the country’s sustained economic growth.
The country’s debt service ratio (DSR) also improved to 5.3 percent last year from 6.3 percent in 2014.
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 80 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 $77.5-billion foreign debt in 2015, about 50.6 percent or $39.2 billion of it came from the private sector —banks and companies alike—while the rest of the balance or $38.3 billion is from the public sector, primarily government borrowings.
About 33.9 percent of the outstanding foreign obligation is due to foreign banks and other financial institutions, 29.7 percent is in the form of bonds or notes, while the 6.1 percent balance is owed to foreign suppliers and exporters.
In terms of currency ratios, 65.5 percent of the foreign debt in 2015 was US dollar-denominated, followed by the Japanese yen (11.7 percent), multi-currency loans from international lenders World Bank and the Asian Development Bank (11.8 percent), and various obligations in 17 other currencies (11 percent).