The country’s stock of external debt fell again in the second quarter of the year as the government continued to repay foreign obligations, making the Philippines less prone to external shocks.
Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed the country’s external debt, held by state and the private sector, declined in its proportion to the size of the economy.
“This was largely a result of net loan repayments as well as negative foreign exchange revaluation adjustments as the US dollar strengthened, particularly against the Japanese yen,” the BSP said in a statement.
The weaker yen meant that the value of obligations denominated in the Japanese currency was smaller if expressed in dollar terms.
Half of the country’s external debt was denominated in the US dollar, the world’s most liquid currency.
The country’s total external debt slipped $1 billion to $58 billion at the end of June from $59 billion in March.
On a year-on-year basis, the country’s external debt was down $3.2 billion or 5.3 percent.
The BSP noted that its dollar reserves at the end of June—at $81.3 billion—was enough to cover 8.5 times the country’s short-term external debt or those that mature in less than a year.
The reserves were also enough to pay for 6.2 times the external debt based on residual maturity—or long-term loans whose amortization payments fall within the next year.
As a ratio to gross domestic product (GDP), which is the standard measure for the size of the economy, the country’s external debt accounted for just 21.8 percent at the end of June, lower than the 22.8 percent the previous quarter and 26.1 percent in June of last year.
Apart from the reduction in the country’s debt stock, the central bank attributed the lower ratio to GDP to the 7.5-percent growth of the economy in the second quarter.
The government’s foreign obligations accounted for the bulk of the external debt at the end of June, totaling at $42 billion, lower than the $42.9 billion the previous quarter. Private sector debt also declined to $16.06 billion from $16.11 billion in the same period.
The BSP said 39.3 percent of the debt was owed to multilateral or bilateral creditors, consisting mainly of overseas development assistance (ODA) loans that carry low interest costs.
Borrowings in the form of bonds and notes issued by the state made up 36.5 percent of the total, 16.8 percent was owned to banks and other financial institutions, while the remaining 7.4 percent was owned to foreign suppliers and exporters that have yet to be paid.