PH foreign debt reached US$ 61.4 billion – BSP

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MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) on Friday reported the rise in the country’s outstanding external debt in the second quarter of 2011 but BSP Governor Amando Tetangco Jr. said this remains in comfortable levels.

The central bank said that the country’s external debt reached US$ 61.4 billion as of last June, up by 0.8 percent from the US$ 60.9 billion at the end of the previous quarter.

The report said loan transactions for the quarter resulted in net outflows but the outstanding foreign liabilities of the country went up due mainly to the “upward foreign exchange revaluation adjustments of US$ 533 million as the US Dollar (the reporting currency for outstanding debt) weakened against other major currencies such as the Japanese Yen, thereby increasing debt figure in US dollar terms.”

The central bank said the external debt rose by US$ 4.2 billion year-on-year “due to net availments of US$ 3.4 billion and upward foreign exchange revaluation adjustments of US$ 2.4 billion as other currencies strengthened against the US Dollar.”

“On the other hand, the US$ 1.7 billion rise in resident investments in Philippine bonds and notes issued abroad during the last 12 months reduced foreign debt by the same extent,” it reported.

“Major external debt indicators remained at comfortable levels at the end of the second quarter,” BSP Governor Amando Tetangco Jr. said.

The central bank chief pointed out that the country’s dollar reserves continue to grow with the end-June level at US$ 69 billion, which is enough to cover 9.6 times the country’s short-term debt and 6.4 times under the remaining maturity concept.

The BSP said proportion of external debt or the outstanding external debt as a percentage of gross national income (GNI) improved to 21.8 percent from year-ago’23.4 percent a year ago.

While its proportion to GDP also improved to 28.8 percent as of last June from end-2010’s 28.8 percent.

Another improvement was noted in the external debt service ratio (DSR), which is the percentage of total principal and interest payments to exports of goods and receipts from services and income likewise, after it got better to 7.9 percent from year-ago’s 9.2 percent.

“The ratio has consistently remained well below the 20 to 25 percent international benchmark range, indicating the sustained improvement in the country’s capacity to service maturing obligations,” the BSP said.

The central bank said bulk of the country’s external debt portfolio is composed of medium to long-term (MLT) loan at 88.4 percent. MLT have tenors of longer than one year.

“The larger share of MLT accounts means that loan payments are spread out over a longer period of time, resulting in a more manageable level of payments,” it said.

Weighted average maturity for all MLT accounts stood at 22.7 years, it said with the public sector registering longer average tenor of 24.5 years against the private sector’s 11.5 years.

The balance of the foreign debt or the remaining 11.6 percent are consisted mainly of trade credits and inter-bank borrowings, the BSP said.

The public sector’s foreign debt went up to US$ 46.9 billion last June from end-March’s US$ 46.5 billion and the central bank said that “transactions during the reference quarter resulted in net repayments of US$ 232 million” due mainly to the “positive foreign exchange revaluation adjustments of US$ 530 million for debt denominated in third currencies increased outstanding debt.”

Also, foreign debt of the private sector went up to US$ 14.5 billion from end-March 2011’s US$ 14.4 billion “mainly due to increased borrowings by local banks.”

The central banks said that among the sources of these funds –official creditors that included multilateral institutions and bilateral creditors — remained to have the largest share at 43.3 percent while foreign holders of bonds and notes came in second at 36.9 percent, foreign banks and other financial institutions at third at 13.3 percent, and foreign suppliers/exporters at 6.5 percent.

Bulk of the loan were denominated in US dollars at 47.4 percent while those in Japanese yen accounts for 28 percent, multi-currency loans from the Asian Development Bank and the World Bank at 10.2 percent and the remainder of 14.4 percent was shared by 18 other currencies. (Joann Santiago, PNA)

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