External debt of $81.3B in end-June still at ‘prudent’ levels

The Philippines’ outstanding external debt stood at $81.3 billion as of end-June 2019, up by $827 million or 1 percent from $80.4 billion as of end-March 2019, according to Bangko Sentral ng Pilipinas Governor Benjamin Diokno.

In a statement, the central bank chief said the rise in the debt stock during the second quarter was brought by the increase in nonresidents’ investments in Philippine debt paper issued offshore amounting to $1.2 billion and positive foreign exchange revaluation adjustments amounting to $405 million.

Net repayments amounting to $650 million and prior periods’ adjustments of $133 million partially offset the uptick in the debt stock.

“Key external debt indicators remained at prudent levels despite the rise in external debt,” he said, referring to all types of borrowings by Philippine residents from nonresidents, following the residency criterion for international statistics.

On an annual basis, the debt stock increased by $9.1 billion due to net availments ($8.8 billion); prior periods’ adjustments ($549 million), and foreign exchange revaluation adjustments ($385 million).

This upward impact on the debt stock was partially offset by the transfer of Philippine debt paper from nonresidents to residents ($746 million).

Gross international reserves (GIR) stood at $84.9 billion as of end-June 2019 and represented 5.5 times’ cover for short-term debt under the original maturity concept.

The debt service ratio, which relates principal and interest payments to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange earnings to meet maturing obligations.

As of end-June 2019, the ratio was at 7.5 percent, similar to the same period a year ago. The debt service ratio has consistently remained at single-digit levels.

As of end-June 2019, the maturity profile of the country’s external debt remained predominantly medium- and long-term in nature, meaning those with original maturities longer than a year, with a share to total at 80.8 percent.

On the other hand, short-term accounts or those with original maturities of up to a year comprised the 19.2-percent balance of debt stock and consisted of bank liabilities, trade credits and others.

The weighted average maturity for all medium- and long-term accounts was at 16.8 years or similar to the previous quarter, with public sector borrowings having a longer average term of 20.8 years compared to 7.7 years for the private sector.

This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable.