PH external debt rises 5.6% as of end-September

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said the country’s outstanding external debt went up by 5.6 percent or $4 billion to $76.4 billion as of end-September this year from $72.4 billion in the same period in 2017 with new borrowings during the quarter period.

External debt – which are all types of borrowings by local residents from nonresidents after the residency criterion for international statistics – increased in the third quarter this year as “new borrowings exceeded loan repayments by $4.4 billion,” said Espenilla in a statement over the weekend.

Still, according to the BSP, “despite the increase in the foreign obligations, the Philippines’ external debt remains within prudent and manageable levels.”

BSP attributed the year-on-year increase in external debt to prior periods’ adjustments totaling $585 million and increase in non-resident holdings of Philippine debt papers issued offshore of $195 million. However, the negative foreign exchange (FX) revaluation adjustments amounting to $1.1 billion partially reduced the upward impact on debt obligations, explained the BSP.

On a quarter-on-quarter basis, the debt stock was up by 5.8 percent or by $4.2 billion from end-June level of $72.2 billion, because of: Net availments of $5 billion by both public and private sectors as the National Government continued to expand financing for its infrastructure development and social spending programs; and private firms’ decision to increase working capital, expand funding base, and extend term liabilities.

The quarter-on-quarter increase in the debt level during the third quarter is due to net availments of $6 billion of both public and private sectors, totaling $2.2 billion and $3.8 billion, respectively.

The BSP said the impact was partially offset by the following: The $1.1-billion negative FX revaluation adjustments as the US dollar strengthened against third currencies, particularly the peso ($787 million) and Japanese yen ($262 million); transfer of credits from non-residents to residents ($328 million) and adjustments on prior periods’ transactions ($376 million) due to late reporting also partially offset the increase of the external debt stock. As of end-September, the majority of external debt consists of medium- and long-term loans or about 82.4 percent of the total debt stock consisting of bank liabilities, trade credits and others. These loans have a weighted average maturity of 17 years.

Public sector borrowings have average maturity of 21.2 years while the private sector borrowings are at 7.7 years. “This means that FX requirements for debt payments are well spread out and, thus, more manageable,” said the BSP.

Short-term loans with one year maturity, accounted for 17.6 percent of total external debt.

As of end-September, public sector borrowings increased to $39.5 billion compared to the previous quarter’s (endJune) $38 billion. Its share to total debt stock stood at 51.8 percent. During the quarter, there were additional borrowings such as the $2.1 billion NG issuances, plus the $1.4-billion Samurai Bonds and some $911 million from multilateral credits.

Private sector debt, which accounted for 47.4 percent of total external debt, also rose to $36.9 billion from the previous quarter of $34.2 billion because of “commercial banks issuing notes offshore to diversify sources of liquidity and extend term liabilities as well as other private firms’ decision to expand working capital amid strong domestic demand,” said the BSP.