Foreign loans remain prudent

In the case of the Philippines, the relatively low external debt-to-GNI ratios attest to the government’s policy of sustaining its prudent borrowing activities

The country’s foreign loans remain prudent compared to its regional peers, despite being higher due to the pandemic, the Department of Finance (DoF) disclosed.

Latest economic bulletin from the agency revealed the country’s total external debt in 2019 is at 20.11 percent of the gross national income (GNI), significantly lower than Malaysia (64.59 percent), Indonesia (36.85 percent) and Thailand (34.07 percent).

Citing a data from the World Bank, the DoF took note that the Philippines ranked lowest in terms of gross external debt among the ASEAN-5 countries.

“As a percent of Exports of Goods and Services and Primary Income, the Philippines’ external debt ratio dropped to 54.4 percent in the first quarter of 2020 from 54.8 percent in the same period last year,” the DoF said.

“The decline is due primarily to public sector debt which dropped from $40.13 billion to $38.3 billion. Compared with two decades ago, when the country was recovering from the Asian financial crisis, the external debt ratio in 2020 was significantly lower at 51.2 percent of the debt-exports ratio in 2000,” it added.

Data from the Bangko Sentral ng Pilipinas (BSP) also revealed external debt for the second quarter 2020 growing by 7.4 percent to $87.5 billion from $81.5 billion quarter-ago owing to the National Government’s net availments of funding from bilateral and multilateral creditors along with its global bond issuance earlier this year.

According to the DoF, the current health crisis definitely sent countries scrambling for funds to support their respective economies and that the Philippines’ existing debt metrics helped it secure its much-needed funding for such.

“In the case of the Philippines, the relatively low external debt-to-GNI ratios attest to the government’s policy of sustaining its prudent borrowing activities,” the DoF explained.

“While the realities brought about by the health crisis significantly changed the global economic and financial landscape, the government is steadfast in pursuing various reforms to raise much needed revenues to stimulate the economy and at the same time enhance the fiscal space,” it added.

As a percent of Exports of Goods and Services and Primary Income, the Philippines’ external debt ratio dropped to 54.4 percent in the first quarter of 2020 from 54.8 percent in the same period last year.

To recall, Finance Secretary Carlos Dominguez III said the government “may not need to borrow much” given current developments in the Bureaus of Internal Revenue and of Customs’ tax collections, which have already exceeded their respective targets for the January to August period.