External debt stock down to $73.8B

The country’s foreign debt stock further fell to $73.805 billion at the end of the first quarter, the lowest since 2011.

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the end-March outstanding external debt declined 1.3 percent from the $74.763 billion as of the end of 2016. It was also lower than the $77.64 billion debt stock a year ago.

BSP data showed the end-March figure was the lowest since end-2011’s $75.569 billion.

Tetangco attributed the quarter-on-quarter decline in external debt to the transfer of $497 million in Philippine debt paper to residents from non-residents; $255 million in net principal repayments, and prior periods’ adjustments due to late reporting of principal payments worth negative $673 million.

“The downward impact of these developments on the debt stock was partially offset by the positive foreign exchange revaluation adjustments ($466 million) as the Japanese yen strengthened against the US dollar,” Tetangco said.

As for the year-on-year drop, Tetangco attributed it to the following: $2.1 billion in net principal repayments by both the government and the private sector; $383 million in negative forex revaluation adjustments, and previous periods’ audit adjustments worth negative $1.5 billion.

Tetangco said the year-on-year decline was nonetheless slightly offset by a $126-million rise in foreign investments in Philippine bonds issued offshore during the first quarter.

To recall, the Philippine government in January sold $500 million in new global bonds while also successfully switching $1.5 billion in previously issued bonds.

The $500 million in 25-year bonds maturing in 2042 were sold at a coupon of 3.7 percent, similar to the record-low rate last year and below the 3.95-percent initial pricing guidance.

The global bond sale attracted $4.5 billion in tenders, of which 43 percent came from Europe, 33 percent from Asia, and 24 percent from the United States.

The new money raised from the offshore bond issuance will be used for budgetary support, especially to fund the higher infrastructure spending requirement of the Duterte administration.

According to Tetangco, “key external debt indicators remained at comfortable levels during the first quarter of 2017.”

For instance, the external debt ratio, a solvency indicator expressing the total outstanding debt as a percentage of the annual aggregate output, improved to 20 percent as of end-March from 20.4 percent a quarter ago and 21.9 percent a year ago. “The same trend was observed using the gross domestic product as denominator, with the economy growing by 6.4 percent in the first quarter of 2017,” Tetangco added.

The end-March debt service ratio (DSR), meanwhile, eased to 8.7 percent from 9.2 percent a year ago.

However, the first-quarter DSR rose from 6.9 percent at end-2016 “due to large payments during the first quarter of 2017, primarily bond redemption at maturity by the government ($523 million); two universal banks (a total of $575 million); a mining firm ($300 million), and a telco ($228 million),” Tetangco said.