MANILA, Philippines – The country’s external debt level is expected to remain manageable amid increased foreign borrowings to support the national government’s efforts to address the impact of the COVID-19 pandemic, according to the Bangko Sentral ng Pilipinas.
In a statement, BSP Governor Benjamin Diokno said the Philippine economy continues to have the capability to pay off its loans as they come due, despite the fresh round of borrowings done in recent months.
“This is in view of the country’s markedly improved external debt manageability achieved through 20 years of critical structural reforms,” he said.
“Along with sound economic management, reforms involving industry and foreign exchange liberalization, tax and debt management, and the financial sector have helped strengthen the regulatory environment and the economy’s capacity to absorb shocks,” Diokno added.
According to the central bank chief, the Philippines entered the period of health quarantines with a “robust” external debt position.
BSP data showed that the country’s external debt stood at $81.4 billion at end-March 2020, down by $2.2 billion from the $83.6 billion recorded in December 2019.
The external debt figure at the end of the first quarter of 2020 represented 21.4 percent of the country’s gross domestic product — substantially lower than the 57.3 percent recorded 15 years earlier.
The latest ratio indicates the country’s sustained strong position to service foreign borrowings, the central bank chief said.
Aside from this, 83.6 percent of the country’s external debt as of March this year was in the form of medium to long term loans, which means that foreign exchange requirements for debt payments are spread out and more manageable.
Moreover, 57.8 percent of these longer-term borrowings have fixed interest rates which minimize risks from possible interest rate increases.
“Amid a strong external debt profile, the BSP remains steadfast in supporting government efforts to ease the impact of the pandemic,” Diokno said, explaining that this was behind the rationale for the Monetary Board’s approval for $5.6 billion in foreign borrowings as of July this year, in addition to monetary policy easing and liquidity measures.
The borrowings were sourced from the Asian Development Bank ($2.6 billion), the World Bank ($1.5 billion), the Asian Infrastructure and Investment Bank ($750 million), the Japan International Cooperation Agency (50 billion yen or around $477 million), and from Agence Francaise de Developpement (250 million euros or around $295 million).
“The BSP appreciates the immediate response of development partners to extend concessional financing to meet the urgent needs of the government in containing the spread of the COVID-19 pandemic and providing assistance to families most affected by this global health and economic crisis,” Diokno said. [ac]