Foreign debt stock as of Sept hit $76.6B

The country’s foreign debt stock as of end-September slightly declined quarter-on-quarter to $76.6 billion, although remaining at a higher level than a year ago, the Bangko Sentral ng Pilipinas said.

BSP Governor Amando M. Tetangco Jr. said the outstanding external debt was 1.4-percent lower than end-June’s $77.7 billion, mainly due to the negative prior period adjustments of $661 million because of late reporting of principal payments, on top of $582 million worth of net repayments by both the government and the private sector.

However, the BSP said the quarter-on-quarter decline in foreign obligations was offset by the following: Foreign exchange revaluation adjustments worth $96 million as the US dollar depreciated against the Japanese yen during the period; as well as the transfer of $49 million in government-issued debt paper from residents to foreigners.

Compared year-on-year, the end-September external debt was 1.3-percent higher than the $75.6 billion posted in the same period last year mostly due to forex revaluation adjustments (worth $1.6 billion) as well as higher foreign investment in Philippine debt paper issued offshore (at $428 million).

Net repayments amounting to $981 million and previous periods’ adjustments due to late reporting that shaved $55 million from the foreign debt partially offset the year-on-year increase in the debt stock, the BSP said.

Also, Tetangco said “key external debt indicators remained at comfortable levels in the third quarter of 2016.”

For one, the external debt ratio, a solvency indicator expressing the total outstanding debt as a percentage of the annual aggregate output, improved to 21.1 percent from 21.7 percent a quarter ago and 21.5 percent last year.

The end-September debt service ratio (DSR), meanwhile, increased to 6.6 percent from 5.6 percent in the same period last year, as the debt service burden (DSB) rose faster than receipts.

The DSR, or the share of the DSB comprised of interest and principal payment to goods exports as well as receipts from primary income and services, measures how adequate were the country’s FX earnings to meet maturing obligations.

“Nevertheless, the DSR has consistently remained well below the international benchmark range of 20-25 percent,” the BSP said.

According to the BSP, the external debt stock continued to be heavily biased toward medium- to long-term accounts, which composed over four-fifths of the total.

“This means that forex requirements for debt payments are well-spread out and, thus, more manageable,” the BSP said.

The level of external debt that the country holds serves as an indicator for the economy’s vulnerability to financial market spikes. Having too much external debt could cripple an economy if its currency depreciates sharply to make foreign debt payments more expensive. —BEN O. DE VERA