PH external debt ‘manageable,’ says BSP

The Philippines’ outstanding external debt declined slightly at the end of the second quarter as the strong US dollar reduced the value of the country’s obligations to other foreign creditors, the central bank said on Friday.

In a press statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s total foreign debt stood at $72.2 billion as of end-June 2018, down by $997 million, or 1.4 percent from the end-March 2018 level of $73.2 billion.

“The reduction in the debt stock during the second quarter was mainly driven by negative foreign exchange revaluation adjustments ($720 million) as the dollar strengthened against third currencies, particularly the Japanese yen ($454 million),” the BSP said.

“The decline in nonresident investments ($309 million) in Philippine debt papers and net principal repayments ($246 million) further contributed to the decline in the external debt stock,” it added.

Year-on-year, the debt stock declined by $294 million, or 0.4 percent from $72.5 billion in June 2017.

This was brought about by offsetting factors like net principal repayments ($2.4 billion), primarily on private sector’s short-term bank liabilities, prior periods’ adjustments ($1.8 billion) due to late reporting, and transfer of Philippine debt papers from residents to nonresidents ($419 million).

The country’s level of external debt has continued to decline in recent years, from $77.7 billion as of end-2014 to $72.2 billion in end-June 2018, which may be attributed to “prudent debt management and Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize foreign exchange risk,” the central bank explained.

External debt refers to all types of borrowings by Philippine residents from nonresidents, following the residency criterion for international statistics.

As of end-June 2018, the maturity profile of the country’s external debt remained medium- to long-term, with its share to total external debt at 83.2 percent.

Short-term loans accounted for 16.8 percent balance of the debt stock and consisted of bank liabilities, trade credits and others.

The weighted average maturity of medium- to long-term accounts stood at 17.1 years, with public sector borrowings having a longer average term of 22.6 years compared to 7.9 years for the private sector.

As such, demands for foreign exchange to satisfy repayment needs were well spread out, the central bank said.