Borrowing in dollars? Inform us first, says BSP

The Bangko Sentral ng Pilipinas (BSP) has reminded government entities and private sector groups to submit within the next 10 weeks their plans for borrowing from foreign lenders that they intend to do in the fourth quarter 2022 and in 2023.

The 1987 Philippine Constitution requires prior approval by the highest policy making body of the BSP for all foreign loans that the public sector—the national government itself as well as its agencies and financial institutions—will take or guarantee.

Similarly, through the Manual of Regulations on Foreign Exchange Transactions the BSP has such authority over private resident entities that intend to obtain medium- and long-term foreign loans/borrowings from foreign parties, including offshore issuances of debt instruments.

The same goes with private sector plans to issue onshore debt instruments that require settlement in foreign currency.

BSP data show that as of the end of March 2022, the Philippines’ stock of foreign liabilities again outweighed its stock of foreign assets, with the net external liability rising to $31.6 billion.

At end-March 2022, total outstanding external financial assets were pegged at $238.4 billion, while total outstanding external financial liabilities totaled at $269.9 billion.

The latest figures meant an increase in net external liability from $27.6 billion recorded at the end of 2021 (14 percent quarter-on-quarter) and almost double the $16.2 billion at the end of the first quarter of 2021 (95 percent year-on-year).

The BSP said the year-on-year basis surge in the country’s net liability position was attributed mainly to the growth in outstanding foreign direct investments—in the form of debt instruments, foreign loans contracted by residents, and nonresidents’ holdings of equity securities issued by residents.

Moody’s Analytics said in a commentary the debt-to-GDP (gross domestic product or the size of the local economy) ratios across the Asia-Pacific region remained well above prepandemic levels.

The research firm said government debt in Southeast Asia continued to rise in 2021, although the increase was not as steep as in 2020.

Also, some countries such as Singapore, Malaysia and Indonesia did record lower debt ratios in 2021 compared with 2020.

This was partly attributed to the success of these countries in containing domestic COVID-19 cases while keeping production lines open.

“Thailand and the Philippines experienced the largest government debt-to-GDP increase across Southeast Asia and across the globe between the end of 2019 and the end of 2021,” Moody’s Analytics said.

“Both countries were the slowest-growing economies in the region last year and required substantial expansionary fiscal policy to support economic recovery,” it added.

The Philippine government’s debt stock represented 39.6 precent of the domestic economy at the end of 2019, and has ballooned to 60.5 percent of GDP.

Moody’s Analytics noted that during the pandemic, Southeast Asian governments raised debt ceilings to accommodate higher borrowing and spending to support the economy.

“Post-pandemic, fiscal consolidation is expected to begin in 2023 as countries move toward endemic-COVID-19 policies, including an easing of social-distancing measures,” it said.

—Ronnel W. Domingo