Foreign debt stock down slightly to $75B
THE COUNTRY’S external debt stock declined at the end of June as foreign investors let go of Philippine IOUs amid revaluation adjustments during the period.
Documents from the Bangko Sentral ng Pilipinas (BSP) showed a slight decline in the country’s level of external debt, which refers to all types of borrowings by Philippine residents from nonresidents.
At the end of June, outstanding Philippine external debt stood at $75 billion, down by $321 million (or 0.4 percent) from the end-March 2015 level of $75.3 billion.
The decline in the debt level was attributed to the “transfer of Philippine debt paper from nonresidents to residents amid growing concerns on the anticipated interest rate hike by the United States Federal Reserve.”
Negative foreign exchange revaluation adjustments also helped trim the country’s level of debt. This was primarily due to the weakening of the Japanese yen against the US dollar “as Japan allowed some depreciation of the yen to revive the economy by helping its exports become more competitive,” the BSP said.
“Key external debt indicators were observed to have remained at very prudent levels in the second quarter of 2015,” BSP governor Amando M. Tetangco Jr. said in a statement.
Gross international reserves of $80.6 billion as of end-June 2015 were enough to cover 6.1 times for short-term debt based on original maturity.
The country’s debt service ratio, or the amount spent on payments relative to the money the country makes from the exports of goods and services, improved to 5.9 percent in June from 6.2 percent in March 2015 and 6.9 percent in June 2014.
The country’s external debt remained heavily biased toward medium- to long-term accounts, which accounted for 82.4 percent of the total. “This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable,” the BSP said.
Public sector external debt stood at $38.6 billion (or 51.5 percent of total debt stock), lower than the $39.1 billion level (52 percent) as of end-March 2015.
Private sector debt, on the other hand, grew from $36.2 billion a quarter ago to $36.4 billion due to the increase in interbank borrowings.
The level of external debt the country holds serves as an indicator for the economy’s vulnerability to financial market spikes. Having too much external debt can cripple an economy if its currency depreciates sharply, making foreign debt payments more expensive.
Close to a third or 31.7 percent of the country’s external debt was in the form of bonds and other securities held by foreign investors.
This was followed by official sources like loans from multilateral and bilateral creditors at 31.2 percent, obligations to foreign banks and other financial institutions at 30.5 percent, and debt to foreign suppliers and exporters at 6.6 percent.
The country’s debt stock remained largely denominated in US dollar (63.8 percent) and Japanese yen (12.2 percent). US dollar-denominated multi-currency loans from the World Bank and Asian Development Bank comprised 11.6 percent of total, while the remaining 12.4 percent pertained to 17 other currencies, including the Philippine peso (7.3 percent).
