PH external debt declined in Sept

Money owed by the Philippines to the rest of the world declined at the end of September due to foreign exchange adjustments that brought down the value of some debt denominated in certain currencies.

This more than offset the increase in the country’s external debt following liability management exercises by the Treasury that allowed foreigners to snap up more of the country’s bonds from financial markets.

“Looking at external debt indicators, these were observed to remain at comfortable levels at the end of the third quarter,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in a statement.

Data released by the BSP showed that outstanding Philippine external debt approved and registered with the BSP stood at $57.7 billion as of the end of September 2014, down by $375 million (or 0.6 percent) from the $58.1 billion level in June 2014.

On a year-on-year basis, the debt stock was likewise lower (by $1.3 billion) compared to $59.1 billion in September 2013.

The term “external debt” refers to all money owed by Filipinos, including private companies and the government, to foreigners.

The decline in September was a result mainly of the US dollar’s recent strength, which brought down the value of obligations denominated in other currencies like the yen.

These revaluation adjustments resulted in a decline of $1.1 billion over the three-month period. This, however, slightly offset by increased investments by foreigners in Philippine debt paper.

As a percentage of gross domestic product (GDP), the country’s external debt eased to 20.7 percent from 21.9 percent in September 2013 and as high as 37.1 percent in 2007.

The cost of paying these loans also declined to 6.4 percent of all the income the country earned from exports of goods and services, down from 8.2 percent in September last year.

The BSP said any debt service ratio below 10 percent was considered a healthy level in international standards, and was indicative of the “sustained improvement in the country’s capacity to service maturing obligations.”

Most of the country’s debt has long-term in tenor, accounting for at 83.5 percent. This keeps “funding requirements for debt servicing at manageable levels since payments are spread out over a longer period of time,” the BSP said.