The Bangko Sentral ng Pilipinas (BSP) over the weekend reported that the strong dollar enabled the Philippines to reduce foreign debts by over $1.6 billion year on year as of the third quarter.
The revaluation of total debts, however, was offset by residents buying back government debt papers from foreign investors.
The country’s foreign debt stood at $57.7 billion as of end-September 2014, down by $375 million from the $58.1 billion recorded in the second quarter.
“The decline resulted from negative foreign exchange (FX) revaluation adjustments (US$1.1 billion) as the US Dollar strengthened against most third currencies, particularly the Japanese Yen,” the BSP said.
However, the central bank said these were partially offset by the $519-million investments by non-residents in Philippine debt papers, and the $237-million net availments.
Compared with a year earlier, the debt stock also declined by $1.3 billion compared to $59.1 billion in September 2013, as negative FX revaluation adjustments stood at $1.6 billion; excess of repayments over loan draw downs reached $279 million; and prior periods’ adjustments due to audit findings/late reporting was at negative $138 million.
“The downward effect of these factors on outstanding debt was tempered by the transfer of Philippine debt papers from residents to non-residents ($657 million), as foreign investors continued to seek higher yielding emerging market papers,” the BSP said.
External debt refers to all types of borrowings by Philippine residents from non-residents that are approved or registered by the BSP.
The central bank said major external debt indicators were observed to remain at “comfortable levels” at the end of the third quarter.
It said gross international reserves (GIR) of $79.6 billion as of September 2014 represented cover for short-term debt of 8.4 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) improved to 17.2 percent from 17.6 percent in June 2014 and 18.3 percent a year ago.
“The same trend is observed using gross domestic product as denominator, despite the slower growth of the economy at 5.3 percent in the third quarter,” it said.
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 6.4 percent from 6.9 percent in June 2014 and 8.2 percent a year ago.
“The ratio has consistently remained at single digit levels since 2010 indicating sustained improvement in the country’s capacity to service maturing obligations,” it said.