BEFORE Filipinos born today become eligible to vote, the Bangko Sentral ng Pilipinas (BSP) expects the country to have already paid off the foreign debts it incurred as of the end of last year.
The BSP reported that borrowings of Philippine residents from abroad reached $111.3 billion at the end of 2022, which was $4.8 billion more than the $106.43 billion posted in 2021.
Most or 85.1 percent of these debts are medium- and long-term in nature or those with maturities longer than one year.
“The weighted average maturity for all MLT [medium- and long-term] accounts increased to 17.2 years from 16.9 years in the previous quarter, with public sector borrowings having a longer average term of 20.6 years compared to 7 years for the private sector,” the BSP said.
Outstanding external debt (EDT), the BSP said, refers to all types of borrowings by Philippine residents from non-residents following the residency criterion for international statistics.
Short term accounts or those with original maturities of up to one year, account for only 14.9 percent of the outstanding debt stock and consist of bank liabilities, trade credits and others.
“This means that FX [foreign exchange] requirements for debt payments are still well spread out and, thus, manageable,” the central bank said.
Spending for recovery
THIS translated to an external debt to GDP ratio of 27.5 percent. This is higher than the EDT to GDP ratio of 26.8 percent in the previous quarter and 27 percent in end-2021. This was due to higher public and private spending for pandemic recovery as well as efforts to enhance business and commercial activity, the BSP said.
“The EDT to GDP ratio of 27.5 percent signals manageable debt levels as well as the sustained capability of the country to service foreign borrowings in the medium- and long-term,” the central bank said.
Of the MLT accounts, BSP said 56.5 percent have fixed interest rates, 41.7 percent carry variable coupon rates, and 1.8 percent balance are non-interest bearing.
Public sector external debt rose by $2.6 billion to $67.4 billion from $64.8 billion in the previous quarter. The increase slightly raised its share to total vis-à-vis private sector external debt from 60 percent to 60.6 percent.
About $59.8 billion or 88.7 percent of public sector obligations were NG borrowings, while the remaining $7.6 billion pertained to loans of government-owned and controlled corporations, government financial institutions and the BSP.
Private sector
PRIVATE sector debt also grew from $43.1 billion as of end-September 2022 to $43.9 billion as of end-December 2022, albeit slightly decreasing from 40 percent to 39.4 percent.
The increase was due largely to net availments of $354 million, followed by the transfers of Philippine debt papers from residents to non- residents of $228 million and positive FX revaluation of $116 million.
Meanwhile, the Philippines’s major creditor countries were Japan with $14.7 billion followed by the United States of America at $3.5 billion and the United Kingdom at $3.2 billion.
Loans from official sources such as multilateral and bilateral creditors had the largest share (37.9 percent) out of the total outstanding debt, followed by borrowings in the form of bonds/notes (33.1 percent) and obligations to foreign banks and other financial institutions (22.9 percent); the rest (6.1 percent) were owed to other creditors (mainly suppliers/exporters).
In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (77.9 percent) and Japanese Yen (8.8 percent) while the 13.3 percent balance pertained to 15 other currencies, including the Euro, Philippine Peso and Special Drawing Rights.
Bond issuance
MEANWHILE, the BSP data also showed that net availments of $8.4 billion, largely by the national government, and prior periods’ adjustments of $1.6 billion.
These were tempered by the negative FX revaluation of $2.6 billion and the increase in residents’ investments in Philippine debt papers issued offshore of $2.6 billion.
The external debt also increased by 3.1 percent or $3.4 billion from the $107.9-billion level posted at the end of September 2022.
The BSP said the increase in debt stock in the last quarter of 2022 was driven by the national government’s issuance of $2 billion worth of Global Bonds.
Private sector banks, the data showed, also sought external financing which reached $765 million to support relending activities and serve maturing obligations.
“The appreciation of other currencies against the US Dollar increased the US Dollar equivalent of borrowings denominated in other currencies, resulting in an overall positive foreign exchange revaluation of $1.5 billion,” BSP explained. “This FX revaluation, along with prior periods’ adjustments [$59 million], further contributed to the rise of the debt stock.”