Forex loans rise 10.7% to $17.8 billion

MANILA, Philippines — Foreign currency loans extended by Philippine banks grew by double digits in the nine months to September this year amid strong demand due to higher working capital requirements of borrowers, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno said outstanding loans granted by foreign currency deposit units (FCDU) of banks stood at $17.82 billion as of end-September, 10.7 percent higher than the $16.09 billion recoded in the same period last year.

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements as well as banks’ lower interest rates,” Diokno said.

FCDUs are allowed by the BSP to conduct transactions involving foreign currencies, including accepting deposits and extending loans.

Diokno said the maturity mix of the loan portfolio remained biased toward medium- to long-term debt or those payable over a term of more than one year, which represented 77.5 percent of total, higher than the previous year’s 76.7 percent.

He added that the bulk of outstanding loans went to towing, tanker, trucking and forwarding with 23.7 percent, merchandise and service exporters with 15.3 percent, public utility firms with 8.3 percent and producers or manufacturers including oil companies with 4.9 percent.

The BSP chief said gross disbursements increased by 3.7 percent to $17.3 billion in the third quarter due to the increase in funding requirements of an affiliate of a branch of a foreign bank.

Similarly, loan repayments were higher by 5.7 percent, thus resulting in overall net disbursements.

FCDU deposit liabilities likewise increased by 6.1 percent to $41.1 billion as of end-September this year from $38.8 billion last year but was down by 0.5 percent from $41.3 billion in end June this year.

Diokno said the FCDU deposit liabilities held mostly by residents continued to beef up the country’s gross international reserves (GIR).

Latest data showed the country’s GIR level hit a three-year high of $86.39 billion in November from $85.83 billion in October as the central bank continued to build up the foreign exchange buffer.

The buffer is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income and is also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.