THE COUNTRY’S outstanding external debt rose to $77.6 billion as of end-March, higher than the levels in the previous year and the previous quarter, partly due to a weaker dollar, Bangko Sentral ng Pilipinas data showed.
In a statement, BSP Governor Amando M. Tetangco Jr. said on Saturday that foreign obligations at the end of the first quarter inched up 0.2 percent from $77.5 billion as of the end of 2015.
“The increase was attributed to foreign exchange revaluation adjustments worth $814 million as the US dollar weakened, particularly against the Japanese yen; and the previous periods’ adjustments and increased investments in Philippine debt paper by non-resident investors worth $833 million,” Tetangco said.
Compared with a year ago, the increase in the external debt stock was up by 3.1 percent from $75.3 billion in the first quarter of last year.
The faster year-on-year growth in outstanding foreign debt was “due to net availments worth $2.1 billion and FX revaluation and other adjustments in previous periods worth $1.7 billion, which were partially offset by the $1.4-billion decline in non-resident investments in Philippine debt papers,” Tetangco said.
Despite the month-on-month and year-on-year increases, Tetangco said “key external debt indicators remained at very comfortable levels in the first quarter.”
For one, gross international reserves were at a $83 billion at end-March, enough to cover 5.8 times of short-term debt under the original maturity concept, up from $80.7 billion a quarter ago, Tetangco said.
Also, the external debt ratio, a solvency indicator expressing the total outstanding debt as a percentage of annual aggregate output, was unchanged. “The ratio remained at the end-2015 level of 21.9 percent; using GDP [the gross domestic product] as denominator, the ratio was likewise unchanged at 26.5 percent even as the economy posted a 6.9-percent growth in the first quarter of 2016 (from 5 percent in the previous year) as external debt level also grew during the reference period,” he said.
The end-March debt service ratio (DSR), meanwhile, rose to 5.9 percent from 5.3 percent a quarter ago, even as Tetangco said this ratio “has consistently remained well below the international benchmark range of 20-25 percent.”
The DSR, or the share of interest and principal payments to exports of goods as well as receipts from primary income and services, measures how adequate were the country’s FX earnings to meet maturing obligations, the BSP chief explained.
The level of external debt that the country holds serves as an indicator for the economy’s vulnerability to financial market spikes. Having too much external debt could cripple an economy if its currency depreciates sharply to make foreign debt payments more expensive.