Foreign debt climbs 5 percent to $154.9 billion in Q2

MANILA, Philippines — The country’s outstanding external debt rose to $154.93 billion in end-June, driven mainly by fresh borrowings of the national government and private domestic banks, although the Bangko Sentral ng Pilipinas (BSP) said the country’s foreign debt position remained manageable.

External debt, or borrowings owed by Philippine residents to creditors abroad, increased by 5.1 percent from $147.35 billion at the end of March.

Thus, foreign debt as a share of gross domestic product climbed to 31.6 percent from 30 percent in the previous quarter as it grew faster than the economy during the period. GDP measures the value of goods and services produced in the country.

“The quarter-on-quarter increase in the external debt stock was driven mainly by net borrowing activity of the national government and private domestic banks,” the BSP said.

The increase was partly offset by negative forex revaluation effects due to the appreciation of the dollar, as well as a modest decline in non-resident holdings of Philippine debt securities.

BSP data showed that public sector external debt rose to $98.54 billion as of end-June from $95.66 billion three months earlier. Of the total, $92.85 billion was owed by the national government and other public non-bank borrowers.

Private sector foreign debt, meanwhile, climbed to $56.40 billion from $51.70 billion. External obligations of private banks increased to $24.45 billion from $20.79 billion, while those of private non-banks rose to $31.95 billion from $30.90 billion.

Compared to a year earlier, the increase in external debt was primarily driven by the national government’s global bond issuances and loan availments for budgetary and development financing.

Most of the country’s external debt remained medium- and long-term obligations, which reached $134.33 billion at end-June. Short-term debt stood at $20.61 billion.

By creditor, bondholders and noteholders accounted for $49.23 billion of outstanding foreign debt, while banks and other financial institutions held $36.35 billion.

Debt owed to multilateral institutions stood at $43.18 billion, including $18.82 billion due to the Asian Development Bank and $16.9 billion to the International Bank for Reconstruction and Development, the lending arm of the World Bank. Bilateral debt reached $19.23 billion.

Despite the higher debt stock, the BSP said the country retained sufficient foreign exchange buffers to meet near-term obligations.

Short-term external debt based on remaining maturity, which includes obligations originally due within one year as well as portions of longer-term loans falling due over the next 12 months, rose to $31.64 billion.

This was more than covered by the country’s $104.74-billion gross international reserves (GIR), the stock of foreign currency and other reserve assets available to meet external payments and cushion the economy against shocks.

The GIR-to-short-term debt ratio stood at 3.31, which implies that reserves were more than three times the amount of external debt falling due over the next 12 months. The BSP said this indicated sufficient resources to cover near-term foreign obligations.

The debt service ratio, meanwhile, eased to nine percent from 9.2 percent in the same period last year.

The ratio measures principal and interest payments against receipts from exports of goods and services and primary income, indicating how much of the country’s foreign exchange earnings is needed to repay external debt.

“Overall, the external debt position remained broadly manageable, underpinned by sound solvency indicators and adequate liquidity buffers,” the BSP said.