Philippines in better position to deal with foreign debt

The country’s ability to settle its debts to foreign creditors improved in the first eight months of the year.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that from January to August, the country’s debt service burden ratio, or the proportion of its liabilities to its export earnings and remittances, improved to 8.95 percent from the 9.73 percent reported in the same period last year.

The decline, which officials said was an indication of an improvement in the country’s credit-worthiness, was a result of a drop in maturing obligations and an increase in the combined amount of remittances and

export revenues.

Maturing obligations to foreign creditors amounted to $5.064 billion, down by 4.8 percent from $5.318 billion. Remittances and export earnings reached $56.606 billion, up by 3.5 percent from $54.675 billion.

Monetary and finance officials earlier said the improving capacity of the country to pay its debts should prompt ratings agencies to mull over a possible upgrade of the country’s credit ratings.

The Philippines wants its sovereign bonds to have an investment-grade rating. At present, ratings agencies consider the bonds as speculative.

The country is rated a notch below investment grade by Fitch, and two notches below the grade by Moody’s Investors Service and Standard & Poor’s.

The government hopes that the country will attain investment-grade status by 2013. Monetary and finance officials believe that the country deserves credit ratings no lower than a notch below investment grade.

The BSP earlier reported that the country’s foreign exchange reserves stood at a new record level of $76.3 billion as of end-November—26 percent higher than the $60.56 billion reported in the same period last year.