Bangko Sentral ng Pilipinas Governor Benjamin Diokno, announced that the Philippines’ outstanding external debt stood at US$92.0 billion as of end-September 2020, up by US$4.5 billion (or 5.2 percent) from the US$87.5 billion level as of end-June 2020.
The increase in the debt stock during the third quarter was due largely to net availments of: (a) US$2.8 billion by private non-banks to augment its working capital; and (b) US$2.4 billion by the National Government (NG) to fund its COVID-19 pandemic response programs/projects and various infrastructure development projects.
Further increases to the debt level were due to: (a) positive foreign exchange (FX) revaluation of US$636 million as the US Dollar weakened against other currencies amid a slowdown in the United States’ (US) economic recovery and escalating US-China tensions during the quarter; and (b) increase in non-resident investments in Philippine debt papers issued offshore of US$294 million.
The rise in the external debt was partially offset by prior periods’ adjustments of US$2.1 billion.
Year-on-year, the country’s debt stock rose by US$9.3 billion, which was brought about by: (a) net availments (US$5.0 billion) mainly by the NG; (b) transfer of Philippine debt papers from residents to non-residents (US$2.8 billion) as several credit rating agencies affirmed their confidence in the economy during the period; (c) positive FX revaluation (US$936 million); and (d) prior periods’ adjustments (US$645 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 despite the increase in the external debt level, key external debt indicators remained at prudent levels. Gross International Reserves stood at US$100.4 billion as of end-September 2020 and represented 9.0 times cover for short-term (ST) debt based on original maturity.
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 September 2020, the ratio increased to 7.0 percent from 6.4 percent recorded for the same period a year ago. The DSR has consistently remained at single digit levels.
Total outstanding debt (EDT) expressed as a percentage of Gross Domestic Product (GDP) is a solvency indicator. EDT to GDP ratio increased to 25.3 percent from 23.7 percent a quarter ago as GDP contracted by 11.5 percent while external debt rose during the reference quarter. The ratio indicates the country’s 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-September 2020, 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 87.8 percent. On the other hand, ST accounts [or those with original maturities of up to one (1) year] comprised the 12.2 percent balance of debt stock and consisted of bank liabilities, trade credits and others. The weighted average maturity for all MLT accounts decreased to 16.6 years, from 17.0 years during the previous quarter, with public sector borrowings having a longer average term of 20.4 years compared to 7.5 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 increased to US$54.4 billion from US$51.0 billion in the previous quarter. About US$48.0 billion of public sector obligations were NG borrowings while the remaining US$6.4 billion pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP.
Private sector debt increased from US$36.5 billion as of end-June 2020 to US$37.6 billion as of end-September 2020, with share to total decreasing from 41.7 percent to 40.9 percent. The recorded rise was due to net availments of US$2.8 billion by private non-banks and US$1.1 billion bond issuances (US$600 million and US$500 million) by two (2) private local banks. These were partially offset by prior periods’ adjustments of US$2.3 billion.
Major creditor countries were: Japan (US$15.4 billion); The Netherlands (US$3.2 billion); United States of America (US$3.2 billion); and United Kingdom (US$2.4 billion).
Loans from official sources [multilateral and bilateral creditors (comprised of Japan – US$8.7 billion; China – US$1.2 billion; and France – US$732 million, among others)] had the largest share (36.3 percent) of total outstanding debt, followed by foreign holders of bonds and notes (34.2 percent). Meanwhile, obligations to foreign banks and other financial institutions accounted for 23.5 percent; and the rest (5.9 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 (54.8 percent) and Japanese Yen (12.6 percent). US dollar-denominated multi-currency loans from the World Bank and ADB represented 18.7 percent. The 13.9 percent balance pertained to 15 other currencies, including the Philippine Peso, Euro and Special Drawing Rights.
