PH external debt declined in Q1

Money owed by the country to foreigners dipped in the first quarter of this year, keeping the country’s external debt ratios at prudent levels, data released by the central bank on Friday showed.

The drop in external debt—owed by both local businesses and the government to foreign creditors—underpins the improving strength of the Philippine economy.

Owing less money to foreigners means the country becomes less vulnerable to foreign exchange fluctuations.

“Key external debt indicators remained at prudent levels in the first quarter of the year,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said yesterday in a statement.

The country’s outstanding external debt stood at $58.3 billion at end-March 2014, down by $165 million (or 0.3 percent) from the $58.5-billion level at the close of 2013.

This resulted from net repayments mainly on liabilities of banks $833 million, which were partially offset by the increase of investments by foreigners in locally issued debt paper and foreign exchange valuation adjustments.

The US dollar (the reporting currency for debt) weakened, particularly against the Japanese yen, making loans to Japanese creditors more valuable, the BSP said.

Compared to the same period last year, the debt stock likewise declined by $705 million or 1.2 percent from $59 billion due to negative foreign exchange revaluation adjustments.

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 (XGSI), further improved to 6.5 percent in March 2014 from 8.0 percent in 2013.

The DSR has continued to be well below the international benchmark range of 20 to 25 percent, “attesting to the country’s strong liquidity position,” the BSP said.

Long-term loans made up the bulk or 81.9 percent of the country’s foreign obligations.

“The larger share of [long-term] accounts means that scheduled debt payments are spread out over a longer period of time, correspondingly easing cash requirements to meet maturing obligations,” the BSP said.