PH ability to service obligations improved in May

MANILA, Philippines—The country’s ability to service its obligations to foreign creditors and bond holders improved further in May, as income from export and offshore services grew, while its maturing external obligations fell.

Monetary officials said the decline in maturing obligations to foreigners could be credited partly to declining interest rates, which reflected creditors’ and investors’ improved sentiment on the Philippines’ fiscal condition.

Data from the Bangko Sentral ng Pilipinas showed that from January to May, the debt service burden ratio—or the country’s maturing obligations, both principal and interests, in proportion to export earnings and other income abroad—shrank to 8.97 percent from 10.43 percent reported in the same period last year.

On one hand, maturing obligations to foreigners amounted to $3.12 billion in the first five months, down by 6 percent from the $3.33 billion seen in the same period a year ago.

On the other hand, revenue from exports and foreign currency-denominated income from services reached $34.76 billion—up by 8.7 percent from $31.98 billion.

The BSP said the country’s improving capacity to pay its obligations is one of the key reasons why international ratings agencies raised the Philippines’ credit standing.

Earlier this year, Moody’s Investors Service upgraded its rating for the Philippines from three to two notches below investment grade. Fitch also raised its rating from two notches to just a notch below investment grade.

According to the BSP, apart from the debt service ratio, the country’s rising reserve of foreign exchange also suggests an improvement in the country’s ability to service its liabilities to foreign creditors and bond investors.

The country’s gross international reserves (GIR) stood at $75.6 billion as of end-August this year, an amount that could cover 11.4 months’ worth of the country’s usual imports.

The latest GIR was up by about 51 percent from the $49.9 billion reported in the same month last year.