BSP: PH foreign debt falls .2% in Q3

The country’s foreign debt stock further fell to $72.368 billion as of end-September, the lowest level since end-2009’s $64.738 billion, the latest Bangko Sentral ng Pilipinas (BSP) data showed.

In a statement, BSP Deputy Governor and officer-in-charge Maria Almasara Cyd N. Tuaño-Amador noted that the outstanding external debt at the end of the first nine months declined 0.2 percent from $72.5 billion a quarter ago.

“The slight decline in debt stock during the third quarter was brought about by offsetting factors: $805-million net repayments (largely by the private sector) and $91-million increase in residents’ investments in Philippine debt papers issued offshore, which decreased external debt, vis-à-vis $793-million increase arising from adjustments on prior period transactions,” Tuaño-Amador explained.

The drop in foreign debt was a faster 5.6 percent from $76.622 billion at end-September 2016.

“On a year-on-year basis, the debt stock substantially dropped due to net principal repayments by both the public and private sectors ($2.9 billion); negative foreign exchange revaluation adjustments ($1.3 billion) arising from strengthening of the US dollar against other currencies, particularly the yen and the Philippine peso; and increase in residents’ holdings of Philippine debt papers issued offshore ($120 million),” Tuaño-Amador said.

“The peso’s depreciation during the period may have encouraged a shift in borrower preference from foreign to domestic financing to minimize exposure to exchange rate volatility,” Tuaño-Amador added.

The peso traded at 11-year low levels in the third quarter, but the bulk of the government’s borrowings were sourced from local sources mainly through the auction of treasury bills and bonds.

In this regard, Tuaño-Amador said “key external debt indicators remained at comfortable levels during the third quarter.”

The external debt ratio, a solvency indicator expressing the total outstanding debt as a percentage of the annual aggregate output, stayed at 19.5 percent as of September and improved from 21.2 percent a year ago.

“The same trend was observed using gross domestic product as denominator, with the Philippine economy growing by 6.9 percent in the third quarter,” according to Tuaño-Amador.

The end-September debt service ratio (DSR), meanwhile, declined to 6.1 percent from a quarter ago’s 6.6 percent “due to higher receipts during the 12-month period of October 2016 to September 2017,” she said.

The DSR, or the share of the debt service burden comprised of interest and principal payment to goods exports as well as receipts from primary income and services, measures how adequate were the country’s forex earnings to meet maturing obligations.

“The DSR has also consistently remained well below the international benchmark range of 20-25 percent,” the BSP official said.                  /kga