Phl external debt deemed prudent at $62.9B in Q1

The Philippines managed to keep its foreign obligations at prudent levels despite climbing 3.3 percent to $62.9 billion in the first quarter of the year from $60.9 billion on the back of higher government and private sector borrowings, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP officer-in-charge Juan de Zuniga Jr. said the $2 billion rise could be traced to the $970 million excess in foreign borrowings versus repayments as investment and business activities by both public and private sector entities escalated in the first quarter.

Compared to the end-2011 level of $61.7 billion, he explained that the country’s major external debt indicators remained at comfortable levels despite increasing by $1.2 billion due to negative foreign exchange revaluation adjustments.

Despite the slight increase in nominal value, he explained that the Philippines managed to its the external debt to gross domestic product (GDP) ratio to 27.4 percent in the first quarter of the year from 29.5 percent in the same quarter last year.

“Notwithstanding the higher debt level, major external debt indicators remained at very prudent and comfortable levels in the first quarter,” he explained.

The country’s external debt to GDP ratio peaked in 1986 at 97.7 percent of GDP but has generally been on a downtrend since 2003 when it reached 68.6 percent down to 31.3 percent in 2008 before picking up slightly to 32.6 percent in 2009.

Since then, the external debt to GDP ratio declined to 30.1 percent in 2010 and 27.5 percent on 2011.

External debt refers to all types of borrowings by Philippine residents from nonresidents that are approved or registered by the BSP.

The BSP OIC said official creditors consisting of multilateral institutions and bilateral creditors cornered 42.5 percent of the total followed by foreign holders of bonds and notes with 38.5 percent, and foreign banks and other financial institutions with 12.3 percent. The balance of 6.7 percent was mainly foreign suppliers or exporters.

The external debt profile remained predominantly medium to long-term in nature or those with maturities longer than one year accounting for about 88.2 percent of the country’s total external debt. The weighted average maturity of medium to long-term debt was 22.3 years.

On the other hand, short-term external debt consisting largely of trade credits and inter-bank borrowings represented 11.8 percent of the debt stock

Furthermore, the BSP said the ratio of principal and interest payments relative to exports of goods and receipts from services and income improved to eight percent from 8.2 percent due to an increase in the country’s merchandise exports amid the debt crisis in Europe and economic uncertainty in the US.