Foreign debt eases to $72.2 billion

The country’s foreign debt declined by almost $1 billion in the second quarter to $72.2 billion from the first quarter mainly because of foreign exchange adjustments, the Bangko Sentral ng Pilipinas said Friday.

Bangko Sentral Governor Nestor Espenilla Jr. said foreign debt dropped 1.4 percent or $997 million from $73.2 billion registered in the first quarter.

Foreign exchange revaluation adjustments hit $720 million as the US dollar strengthened against third currencies, particularly the Japanese yen ($454 million).

“The decline in non-resident investments [$309 million] in Philippine debt papers and net principal repayments [$246 million] further contributed to the decline in the external debt stock,” he said. 

Data showed that on an annualized basis, the debt stock also went down $294 million or 0.4 percent from $72.5 billion in June 2017.

This was brought about by net principal repayments ($2.4 billion), primarily on private sector’s short-term bank liabilities; prior periods’ adjustments ($1.8 billion) due to late reporting; and transfer of Philippine debt papers from residents to non-residents ($419 million). 

“The country’s level of external debt has continued to decline in recent years [from $77.7 billion as of end-2014 to $72.2 billion in end-June 2018] which may be attributed to prudent debt management and Philippine corporate borrowers’ deleveraging from foreign borrowings in order to minimize FX risk,” Espenilla said. 

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

About 83.2 percent of foreign debt remained medium- to long-term (or those with maturities longer than one year). Short-term loans (or those with maturities of up to one year) accounted for 16.8 percent of the balance and consisted of bank liabilities, trade credits and others.

Public sector external debt decreased to $38 billion (or by $1.2 billion) in the second quarter from $39.2 billion in the first quarter.  It accounted for 52.6 percent of the total external debt. 

Private sector external debt increased slightly to $34.2 billion in end-June from $34 billion in March.

Loans from official sources such as multilateral and bilateral creditors amounting to $23.9 billion and had the largest share of 33.1 percent of the total outstanding debt.

This was followed by foreign holders of bonds and notes (30.7 percent) and obligations to foreign banks and other financial institutions (29.3 percent).  The rest (7 percent) were owed to other creditor types such as suppliers/exporters.

The Bangko Sentral said the creditor mix was well diversified, demonstrating the country’s ability to tap varied sources of financing (both official and commercial sources), which gives the country sufficient flexibility to choose from a broad range of fund sources. 

The country’s debt stock remained largely denominated in US dollar (61.5 percent) and Japanese yen (12.9 percent). 

Espenilla said key external debt indicators continued to improve in the second quarter of 2018. Gross international reserves stood at $77.5 billion as of end-June 2018 and represented 6.4 times cover for short-term debt under the original maturity concept. 

Topics: foreign debt , Bangko Sentral ng Pilipinas , Nestor Espenilla Jr.
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