BSP: PH foreign debt ‘manageable’ despite borrowing binge for pandemic

MANILA, Philippines—The country’s external debt profile remains manageable—and will likely remain so—despite increased foreign borrowings to support the national government’s pandemic response, according to the Bangko Sentral ng Pilipinas (BSP).

Although foreign borrowings grew by $14.9 billion in 2020, the economy continues to have the capability to service its maturing foreign obligations in view of the country’s manageable debt profile, relatively low external debt-to-gross domestic product ratio and low debt service ratio, BSP Governor Benjamin Diokno said at an online briefing on Thursday (May 20).

BSP data showed that the country’s external debt stood at $98.5 billion as of end-December 2020, up from $83.6 billion at end-December 2019.

The end-2020 external debt figure represented 27.2 percent of the country’s GDP. The latest ratio indicated the country’s sustained strong position to service foreign borrowings.

The maturity profile of the country’s external debt also remained predominantly medium- and long-term in nature, with share to total at 85.6 percent.

This means that foreign exchange requirements for debt payments continued to be spread out and manageable. Moreover, 60 percent of these medium- and long-term borrowings have fixed interest rates which reduces risks from possible interest rate increases.
The BSP chief said management of the country’s public debt is a shared responsibility among various government agencies.

The BSP’s role involves evaluating public sector and publicly-guaranteed private sector foreign borrowing applications, which enables the BSP to monitor and analyze these:

• Impact on the country’s external debt
• Developing policies and regulations governing foreign borrowing and other foreign exchange transactions
• Maintaining a comprehensive database on the country’s external debt
• Conducting an annual survey on foreign borrowings plan of both the public and private sectors

Also, the BSP’s efforts to ensure external debt sustainability goes hand in hand with the country’s policy responses to various developments related to external debt levels.

In addition to implementing monetary policy easing and liquidity measures, the Monetary Board approved $15.5 billion in foreign borrowings as of May 7, 2021 to support government efforts to ease the impact of the pandemic. Of this, $1.2 billion will be used for the procurement of coronavirus vaccines.

The borrowings were sourced from bond issuances ($5.1 billion), the Asian Development Bank ($4.3 billion), World Bank-International Bank for Reconstruction and Development ($3.7 billion), Asian Infrastructure and Investment Bank ($1.1 billion), Japan International Cooperation Agency ($942 million), Agence Francaise de Developpement Bank ($283 million) and from the Export-Import Bank of Korea ($100 million).

“As the country continues to deal with the challenges caused by the COVID-19 pandemic, the BSP remains steadfast and committed in supporting the government and the Philippine economy on its way to recovery through prudent debt management, among others,” Diokno said.

TSB