BORROWINGS made by Philippine residents and non-residents or external debt in the January to September period this year has already exceeded the full-year amount recorded in 2021, according to the Bangko Sentral ng Pilipinas (BSP).
BSP data showed external debt stood at $107.9 billion as of end-September 2022, up by $218 million from the $107.7 billion level as of end-June 2022.
This amount has already exceeded the $106.428 billion recorded in the whole of 2021. It may be noted that 2021 saw the country’s external debt exceed $100 billion for the first time since 2009.
“External debt refers to all types of borrowings by Philippine residents from non-residents following the residency criterion for international statistics,” BSP explained.
The data showed the increase in the debt level during the third quarter of 2022 was due to net availments of $3.1 billion, partly offset by $1.2-billion negative foreign exchange (FX) revaluation.
The amount was also offset by the $893-million transfer of Philippine debt papers issued offshore from non-residents to residents and $778 million negative prior periods’ adjustments.
“Bulk of the recorded availments during the quarter were from the increase in the reported ST (short term) liabilities of banks,” said the BSP, as they sought the offshore market to meet funding requirements for relending, investments, and other FX transactions.
“The strengthening of the US Dollar against other currencies brought down the US Dollar equivalent of borrowings denominated in other currencies, providing an offsetting effect on the external debt levels,” it added.
The data also showed that year-on-year, the country’s debt stock rose by $2 billion. The increase was driven by net availments of $9.9 billion, largely by the National Government at $5.5 billion and prior periods’ adjustments of $1.5 billion.
BSP, meanwhile said, the transfer of Philippine debt papers from non-residents to residents of $4.9 billion as well as the negative FX revaluation of $4.5 billion partially tempered the increase in the debt stock for said period.
Debt profile
The BSP said that as of September 2022, the maturity profile of the country’s external debt remained predominantly medium- and long-term (MLT) in nature.
MLT debt, BSP said, pertains to those with original maturities longer than one year with share to total at 84.8 percent.
Meanwhile, ST accounts or those with original maturities of up to one year comprised the 15-percent balance of debt stock and consisted of bank liabilities, trade credits and others.
The weighted average maturity for all MLT accounts remained at 16.9 years as compared to the previous quarter, with public sector borrowings having a longer average term of 20.5 years compared to 6.8 years for the private sector.
“This means that FX requirements for debt payments are still well spread out and, thus, manageable,” BSP said.
Meanwhile, the public sector external debt declined to $64.8 billion or by $928 million as of end-September 2022 from $65.7 billion as of end-June 2022, with share to total likewise decreasing to 60 percent from 61 percent.
About $56.8 billion or 87.7 percent of public sector obligations were NG borrowings while the remaining $8 billion pertained to debt of government-owned and -controlled corporations, government financial institutions and the BSP.
The BSP data also showed that private sector debt grew to $43.1 billion as of end-September 2022 from $42 billion as of end-June 2022, with share to total increasing to 40 percent from 39 percent.
The rise in private sector debt was mainly due to an increase in the ST liabilities reported by banks, which offset prior periods’ adjustments of negative $1 billion, transfer of Philippine debt papers from non-residents to residents of $240 million and negative FX revaluation of $128 million.
The country’s major creditor countries were Japan, which the country owed $13.1 billion followed by the United Kingdom, $3.3 billion and the United States of America, $3.1 billion. BSP gave assurance that the country’s creditor mix continues to be well-diversified.
Loans from official sources such as multilateral and bilateral creditors had the largest share at 37.7 percent of total outstanding debt.
This was followed by borrowings in the form of bonds/notes at 33.1 percent and obligations to foreign banks and other financial institutions, 22.5 percent; the rest or 6.7 percent were owed to other creditors, mainly suppliers/exporters.
In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar at 57.6 percent and Japanese Yen at 8.3 percent.
The BSP said the 34.1-percent balance pertained to 15 other currencies, including the Euro, Philippine Peso and Special Drawing Rights.
Percent of GDP
With this, the BSP said the country’s outstanding external debt (EDT) slightly grew in the third quarter of 2022, while the country’s external debt to Gross Domestic Product (GDP) remained at 26.8 percent similar to that of the previous quarter.
“The low EDT to GDP ratio, a solvency indicator, indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term. The ratio remains one of the lowest when compared to other ASEAN member countries,” the BSP said.
Other key external debt indicators also remained at prudent levels. Gross international reserves stood at $93 billion as of end-September 2022 and represented 5.7 times cover for short-term (ST) debt based on the original maturity concept.
The debt service ratio (DSR) dropped to 5.4 percent from 8.2 percent recorded for the same period last year due to lower repayments accompanied by higher receipts.
The DSR, which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations.