PH foreign debt steady in Q1 as pandemic caps overseas borrowings

MANILA, Philippines – The outbreak of the coronavirus pandemic helped cap foreign borrowings by public and private entities in the first quarter, resulting in only a small uptick of the country’s total external debt on an annual basis and a slight decline from the previous quarter’s levels.

In a statement, the Bangko Sentral ng Pilipinas said that the Philippines’ outstanding external debt stood at $81.4 billion as of end-March 2020. Year-on-year, the country’s debt stock rose by $990 million but was down by $2.2 billion or 2.6 percent from the $83.6 billion level as of end-December 2019.

“The decline in the debt level during the first quarter was due to net repayments of $4 billion largely attributed to the settlement of short-term maturing obligations by the private sector,” the central bank said.

This was offset by the $1.1-billion increase in foreign investments in Philippine debt papers issued offshore, which the regulator said “demonstrated investors’ confidence in the country’s creditworthiness.”

External debt refers to all types of borrowings by Philippine residents from foreign entities.

Also helping offset the decline in debt were prior periods’ adjustments of $580 million, and positive foreign exchange revaluation adjustments of $101 million as the US dollar weakened against the Japanese yen.

Although net repayments amounted to $2.2 billion, largely by private sector banks’ short term accounts, this was more than offset by the sale of Philippine debt papers from residents to foreign entities ($2.4 billion); prior periods’ adjustments ($482 million); and positive foreign exchange adjustments ($266 million).

The central bank stressed that that key external debt indicators remained at “prudent levels.”

The country’s gross international reserves stood at $88.9 billion as of end-March 2020 and represented 6.7 times cover for short term debt.

From January to March 2020, the debt service ratio — which relates principal and interest payments to exports of goods and receipts from services and primary income — increased to 8.9 percent from 5.7 percent recorded for the same period a year ago due to higher payments.  The debt service ratio has consistently remained at single-digit levels.

As of end-March 2020, the maturity profile of the country’s external debt remained predominantly medium- to long-term in nature, that is those with original maturities longer than one year, with share to total at 83.6 percent.

On the other hand, short term accounts comprised the 16.4 percent balance of debt stock and consisted of bank liabilities, trade credits, among others. The weighted average maturity for all medium- to long-term accounts slightly increased to 16.9 years, from 16.7 years during the previous quarter, with public sector borrowings having a longer average term of 20.9 years compared to 7.4 years for the private sector.