External debt hits $118 billion

United States dollar banknotes and an American flag displayed on a laptop screen are seen in this illustration photo taken in Poland on Dec. 26, 2022. — JAKUB PORZYCKI/NURPHOTO VIA CONNECT

THE PHILIPPINES’ outstanding external debt reached $117.918 billion at end-June as the government diversified its borrowings from other countries and institutions.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Friday night showed external debt increased by 9.5% to $117.918 billion at end-June from $107.692 billion in the same period a year ago.   

However, it dipped by 0.8% from the record $118.812 billion seen at the end of March.

The BSP in a statement said the annual growth of the external debt stock was driven by net availments of the National Government (NG) worth $7.9 billion.   

It was also due to the change in the scope of the external debt, which now includes nonresidents’ peso-denominated debt securities issued onshore and other prior adjustments.   

“Meanwhile, the transfer of Philippine debt papers issued offshore from nonresidents to residents of $1.3 billion and negative FX (foreign exchange) revaluation of $295 million partially tempered the year-on-year increase in the debt stock,” the BSP said.   

External debt includes all types of borrowings by residents from nonresidents.

“The increase in external/foreign debt was due to some diversification of the country’s borrowing sources other than domestic borrowings, but realistically entail greater FX risks,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Higher external debt also ensuring that the foreign commercial borrowing/bond issuance shelves are continuously available and liquid in terms of market trades for foreign investors.”

Mr. Ricafort noted the annual growth in external borrowings was due to official development assistance (ODA) loans from multilateral sources such as the World Bank, the Asian Development Bank, among others.   

The BSP said the quarter-on-quarter decline in the debt level was “due mainly to the impact of the US dollar appreciation against other currencies amid further monetary policy tightening by the Federal Reserve.”

The peso closed at P55.20 against the dollar on June 30, weakening by 1.5% or 84 centavos from the P54.36 finish on March 31.   

The US Federal Reserve hiked its policy rate to 25 basis points at its meeting in May, bringing the target Fed funds rate to 5-5.25%.   

“The sale of Philippine debt papers by nonresidents to residents also decreased the debt stock by $305 million. These offset prior periods’ adjustments of $264 million and net availments of $110 million,” the central bank said.   

This brought the external debt ratio, or the external debt as a percentage of gross domestic product (GDP) to 28.5%, slightly lower than the 29% seen in the previous quarter.   

“Nevertheless, the country’s external debt-to-GDP ratio is still among the lowest compared to other Asian countries, thereby giving the country greater leeway to increase foreign borrowings,” Mr. Ricafort said.    

BSP data also showed the debt service ratio, or principal and interest payments as a fraction of export receipts and primary income, rose to 11% at the end of June from 4.6% a year earlier.

Borrowings by the public sector inched up by 0.9% to $74.5 billion as of end-June from $75.2 billion in the quarter earlier.

“About $67.7 billion (90.9%) of public sector obligations were NG borrowings, while the remaining $6.8 billion pertained to borrowings of government-owned and -controlled corporations, government financial institutions and the BSP,” the central bank said.

Private sector debt also slipped by 0.5% to $43.4 billion as of end-June from $43.6 billion as of end-March.

The Philippines’ top creditor countries were Japan ($13.3 billion), the United States ($4.1 billion), and the United Kingdom ($3.7 billion) as of end-June.

Loans from multilateral ($32 billion) and bilateral sources ($12.6 billion) accounted for 37.9% of all external borrowings.

Other sources were bonds ($40.7 billion or 34.5%) and foreign banks and other financial institutions ($25 billion or 21.2%), while the rest ($7.5 billion or 6.4%) were owed to suppliers and foreign exporters. — Keisha B. Ta-asan

Neil Banzuelo

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