Foreign borrowings remain at ‘manageable’ level

MANILA, Philippines — The Philippines’ foreign borrowings were steady in the third quarter — remaining at levels the central bank described as “manageable” — as new offshore financing was offset by repayment of liabilities that had fallen due.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s external debt stock, covering both government and private obligations, was relatively flat quarter-on-quarter, up by just 0.1 percent to $149 billion as of end-September.

That was equal to 30.9 percent of gross domestic product, a slight improvement from 31.2 percent in the prior quarter.

The latest results came amid a deepening corruption crackdown that has shaken business confidence, with capital outflows seen during the period that weighed down heavily on the peso and local stock market.

Even so, the BSP said the marginal quarter-on-quarter increase was “underpinned by heightened engagement of nonresident investors in the domestic capital markets.”

Figures showed that foreign appetite for Philippine debt was steady, with net purchases of local securities reaching $1.47 billion. Those inflows were partly offset by net repayments of $764.56 million, tempering the overall rise in external borrowings.

There were also valuation adjustments amounting to $442.50 million due to the US dollar appreciation during the third quarter.

But on a year-on-year basis, the country’s external debt increased by 6.8 percent, driven by bond issuances by the national government amounting to $3.33 billion. External financing tapped by local banks, amounting to $1.58 billion, also added to the debt stock.

Still, the BSP emphasized that the country’s external debt metrics remained within prudent thresholds, providing some buffer against the turbulence shaking global capital markets.

Short-term external debt due within a year or less stood at $27.16 billion as of September, comfortably covered by $109.06 billion in gross international reserves (GIR). That level of GIR provides four times cover for short-term obligations — roughly in line with other emerging economies.

Meanwhile, debt service ratio — another indicator of capacity to settle debt by comparing loan payments with the country’s income from exports and other inflows — improved to 8.5 percent, from 11.5 percent a year earlier.

This, the BSP explained, was due to lower principal and interest payments by local borrowers as of the second quarter.

Under a presidential order, the BSP is the designated agency for compiling and publishing external debt statistics, a mandate aimed at bolstering transparency.

Readily available debt data help borrowers and lenders make better decisions while giving policymakers and analysts the tools to safeguard debt sustainability and broader macroeconomic stability. —Ian Nicolas P. Cigaral