External debts balloons 12% to $81.3 billion in H1

MANILA, Philippines — The country’s external debt recorded a double-digit 12.5 percent increase in the first half as the government continues to borrow more from foreign lenders, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

BSP Governor Benjamin Diokno said the country’s outstanding external debt stood at $81.26 billion as of end-June, $9.06 billion higher than the end-June 2018 level of $72.2 billion and $860 higher than the end-March level of $80.4 billion.

Diokno attributed the increase in the country’s external debt stock to the net availments amounting to $8.8 billion from January to June as the national government continues to borrow heavily from foreign sources to finance the country’s budget deficit.

In January, the national government raised $1.5 billion from the sale of 10-year global bonds followed by the issuance of eight-year global bonds worth 750 million euros in May.

In the same month, the Philippines returned to the Chinese debt market with the issuance of 2.5 billion yuan worth of panda bonds.

Diokno also cited the prior periods’ adjustments worth $549 million and foreign exchange revaulation adjustments worth $385 million due to the strengthening of the peso against the dollar.

On the other hand, the BSP chief said the increase was partially offset by the transfer of Philippine debt papers from non-residents to residents amounting to $746 million.

Despite the increase, Diokno said the key external debt indicators of the Philippines remained at prudent levels as the country’s gross internal reserves (GIR) stood at $84.9 billion as of end-June, equivalent to 5.5 times cover for short-term debt under the original maturity concept.

“Key external debt indicators remained at prudent levels despite the rise in external debt,” Diokno said.

According to Diokno, the debt service ratio (DSR) that measures adequacy of the country’s foreign exchange earnings to meet maturing obligations remained at single-digit levels to 7.5 percent.

On the other hand, the external debt ratio – a solvency indicator – slightly decreased to 19.9 percent from 20 percent a quarter ago.

“The ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term,” Diokno said.

Data showed the maturity profile of the country’s external debt remained predominantly medium- and long-term in nature with original maturities longer than one year with share to total at 80.8 percent, while short-term accounts with maturities of up to one year comprised the 19.2 percent balance.

“The weighted average maturity for all medium- and long-term accounts was at 16.8 years similar to the previous quarter, with public sector borrowings having a longer average term of 20.8 years compared to 7.7 years for the private sector. This means that foreign exchange requirements for debt payments are well spread out and, thus, more manageable,” Diokno said.

Public sector external debt increased to $42.3 billion or 49.9 percent of the total. About 83.3 percent or $35.2 billion was national government borrowings, while the remaining 16.7 percent or $7 billion pertained to other government agencies’ loans.

Private sector debt increased to $39 billion or 48 percent of the total. The decline in private sector borrowings was due largely to the reduction in bank liabilities.