PH foreign debt down by 2.1%

The country’s foreign debt stock dropped by 2.1 percent to $59 billion at the end of the first quarter of the year from $60.3 billion as of end 2012, according to the Bangko Sentral ng Pilipinas.

“This was due to negative foreign exchange revaluation as the US dollar strengthened, particularly against the Japanese yen, which reduced the dollar value of yen-denominated loans,” the BSP said in a statement released on Friday.

Year-on-year, the country’s external debt stock dropped by $2.6 billion.

External debt refers to all obligations of Filipinos from overseas.

“Major external debt indicators remained at comfortable level in the first quarter,” BSP Governor Amando M. Tetangco Jr. said in the statement, noting that the BSP’s foreign exchange reserves were enough to pay 8.6 times of the country’s maturing obligations.

As a percentage of gross domestic product (GDP), foreign liabilities declined to 22.8 percent from 26.9 percent last year.

The BSP attributed the improvement in the foreign debt-to-GDP ratio to the expansion of the Philippine economy in the first quarter, clocking it at 7.8 percent. This was the fastest growth rate in all of Asia and the highest so far under the Aquino administration.

The country’s external debt service ratio, or the ratio of debt payments to income from exports and services, improved to 7.8 percent as of March from 9.4 percent a year ago. The BSP said this was well below the international benchmark of 20 percent, reflecting the “sufficiency of foreign exchange (income) to meet maturing obligations.”

More than 83 percent of the county’s external debt is considered medium to long-term. A larger share of long-term debt means maturities are spread out over time, reducing the risk of sudden shocks that may come from a steep depreciation of the peso, which makes foreign debt more expensive.

Public sector foreign debt, which accounted for the bulk of the total, fell to $42.9 billion as of March from $45.2 billion in December, following an effort by fiscal officials to reduce the country’s reliance on foreign borrowings to fund the deficit.

In contrast, private sector foreign debt rose to $16.1 billion from $15.2 billion in the same period as local firms borrowed more cheap money from all sources to fund their expansion.