BANGKO Sentral ng Pilipinas Governor Benjamin Diokno expressed confidence that the Philippines will retain its investment grade rating from all three major international credit watchers, as the BSP’s latest assessment shows the country’s debt profile will remain manageable amid increased foreign borrowings.
In a press briefing on Thursday, Diokno told reporters the recent increase in foreign borrowings, as propelled by the pandemic-induced disruptions, is sustainable and manageable.
Diokno noted that the loans taken up by the government are diversified with low interest rates. As such, they do not see the government debt-to-GDP (gross domestic product) ratio exceeding the 60-percent threshold for the year.
Asked whether the rising debt remains manageable enough for credit watchers to keep their ratings of the country this year, Diokno said, “definitely.”
“While admittedly the debt-to-GDP ratio is rising, it is still within the 60-percent threshold and we are very careful about that,” he said.
According to Diokno, the current external debt as a percentage of GDP as of 2020 is at 27.2 percent. The total public external debt to GDP ratio, meanwhile, is at 54.6 percent.
BSP data showed the country’s external debt stood at $98.5 billion as of end-December 2020, up from $83.6 billion recorded at end-December 2019.
The end-2020 external debt figure represented 27.2 percent of the country’s GDP. The latest ratio indicates the country’s sustained strong position to service foreign borrowings.
The maturity profile of the country’s external debt also remained predominantly medium and long term (MLT) in nature, with share to total at 85.6 percent.
“This means that foreign exchange requirements for debt payments continued to be spread out and manageable,” Diokno said, adding that 60 percent of MLT borrowings have fixed interest rates, which minimizes risks from possible interest rate increases.
MB-approved loans
Meanwhile, Diokno said the Monetary Board approved $15.5 billion in foreign borrowings as of 7 May 2021 to support government efforts to ease the impact of the pandemic.
Of these, $1.2 billion will be used for the procurement of Covid-19 vaccines.
The borrowings were sourced from bond issuances at $5.1 billion, the Asian Development Bank at $4.3 billion, World Bank-International Bank for Reconstruction and Development at $3.7 billion, Asian Infrastructure and Investment Bank at $1.1 billion, Japan International Cooperation Agency at $942 million, Agence Francaise de Developpement Bank at $283 million and the Export-Import Bank of Korea at $100 million.
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