Category : Press Release
Date : June 18, 2021
Agency : Bangko Sentral ng Pilipinas
Title : The Philippines’ External Debt Declines by US$1.4 Billion in the First Quarter of 2021
Article : ?Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno, announced that the Philippines’ outstanding external debt stood at US$97.0 billion as of end-March 2021, down by US$1.4 billion (or 1.5 percent) from the US$98.5 billion level as of end-December 2020.

The decline in the debt level during the first quarter of 2021 was caused mainly by net repayments of US$3.1 billion attributed to the settlement of obligations by private local banks and the redemption by the National Government (NG) of its maturing bonds. Negative foreign exchange (FX) revaluation of US$1.0 billion further contributed to the decrease as the US Dollar strengthened against other currencies amid the rise in US Treasury bond yields, among others. The downward impact of the net repayments and FX revaluation more than offset prior periods’ adjustments of US$2.3 billion and increase in non-resident investments in Philippine debt papers issued offshore of US$365 million.

Year-on-year, the country’s debt stock rose by US$15.6 billion brought about by: (i) net availments of US$13.5 billion, mainly by the NG and private non-banks; (ii) transfer of Philippine debt papers from residents to non-residents of US$1.1 billion; (iii) prior periods’ adjustments of US$687 million; and (iv) positive FX revaluation of US$390 million.

External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.

External Debt Ratios

The Governor further stated that key external debt indicators remained at prudent levels. Gross International Reserves stood at US$104.5 billion as of end-March 2021 and represented 7.7 times cover for ST debt based on the original maturity concept.

The debt service ratio (DSR), which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations. For January to March 2021, the ratio increased to 13.5 percent from 10.9 percent recorded for the same period a year ago due to higher payments and lower receipts.

Total outstanding debt (EDT) expressed as a percentage of Gross Domestic Product (GDP) is a solvency indicator. EDT to GDP ratio decreased (an improvement) to 26.7 percent from 27.2 percent a quarter ago. The ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term (MLT).

The country’s EDT to GDP ratio remains one of the lowest as compared to other ASEAN member countries.

Debt Profile

As of end-March 2021, the maturity profile of the country’s external debt remained predominantly MLT in nature [i.e., those with original maturities longer than one (1) year], with share to total at 85.9 percent. On the other hand, ST accounts [or those with original maturities of up to one (1) year] comprised the 14.1 percent balance of debt stock and consisted of bank liabilities, trade credits and others. The weighted average maturity for all MLT accounts slightly increased to 17.1 years, from 16.6 years during the previous quarter, with public sector borrowings having a longer average term of 20.9 years compared to 7.3 years for the private sector. This means that FX requirements for debt payments are well spread out and, thus, more manageable.

Public sector external debt stood at US$56.8 billion from US$58.1 billion in the previous quarter. About US$50.8 billion of public sector obligations were NG borrowings while the remaining US$5.9 billion pertained to loans of government-owned and controlled corporations, government financial institutions and the BSP.

Private sector debt slightly declined from US$40.4 billion as of end-December 2020 to US$40.3 billion as of end-March 2021, although the share to total increased from 41.0 percent to 41.5 percent. The recorded drop was due to: (a) settlement of maturing obligations by private domestic banks; (b) increase in resident investments in Philippine debt papers issued offshore; and (c) negative FX revaluation, which slightly offset the increase caused by prior periods’ adjustments.

Major creditor countries were: Japan (US$15.3 billion), The Netherlands (US$3.2 billion), United States of America (US$3.0 billion), and United Kingdom (US$2.5 billion). Creditor mix continues to be well-diversified.

Borrowings in the form of bonds/notes had the largest share (35.8 percent) of total outstanding external debt, followed by loans from official sources [multilateral and bilateral creditors (comprised Japan - US$8.7 billion; China - US$1.1 billion; and France - US$722 million, among others) – 35.7 percent], and obligations to foreign banks and other financial institutions (22.5 percent); the rest (6.0 percent) were owed to other creditor types (mainly suppliers/exporters).

In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (56.9 percent) and Japanese Yen (11.4 percent). US dollar-denominated multi-currency loans from the World Bank and ADB represented 19.5 percent. The 12.2 percent balance pertained to 14 other currencies, including the Philippine Peso, Euro and SDR.

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