The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, has approved $2.8 billion in public sector foreign borrowings in the second quarter of 2021, 59 percent lower than $6.84 billion in the same period last year.
The BSP said in a statement over the weekend the borrowings consisted of one Euro-denominated bond issuance amounting to EUR2.10 billion and a project loan amounting to $300 million.
“These foreign borrowings will fund the National Government’s general financing requirements (EUR2.10 billion); and COVID-19 pandemic response covering vaccine procurement and distribution ($300 million),” it said.
Prior approval by the Bangko Sentral ng Pilipinas through the MB is required for all foreign loans to be contracted or guaranteed by the Philippines.
The law also requires all foreign borrowing proposals by the national government, state agencies and financial institutions to be submitted for approval-in-principle by the MB before the start of actual negotiations.
The BSP promotes the judicious use of resources and ensures that external debt requirements are at manageable levels to support external debt sustainability.
The country’s external debt hit $97.05 billion at the end of the first quarter of 2021, a manageable level, according to the Department of Finance earlier.
The country’s external debt stock at the end of the first quarter of 2021 was down 1.5 percent from its end-2020 level. This is equivalent to 26.7 percent of GDP, of which 15.6 percentage points are contributed by the public sector and 11.1 percentage points by the private sector.
The recent build-up in external debt was driven by the government’s resource mobilization against the COVID-19 pandemic.
“In 2020, the public sector’s external debt increased 35.8 percent but that of the private sector’s external debt actually declined by 1.1 percent. In the first quarter of 2021, public sector debt declined by 2.4 percent; the private sector debt likewise declined by 0.2 percent,” the DoF said.
“At 26.7 percent of GDP, the country’s external debt is at manageable level. This ratio is about a half of that in 2005, at 57.3 percent, the first comparable year that uses the IMF’s BPM6 methodology in calculating balance-of-payments statistics,” the DoF said.
It said the external debt-GDP ratio of the Philippines is also the lowest among the ASEAN-5 countries.
External debt refers to all types of borrowings by Philippine residents from non-residents, following the residency criterion for international statistics.
The BSP earlier said the decline in the debt level during the first quarter of 2021 was caused mainly by net repayments of $3.1 billion attributed to the settlement of obligations by private local banks and the redemption by the national government of its maturing bonds.
The negative foreign exchange revaluation of $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.
Year-on-year, the country’s debt stock rose by $15.6 billion due to the net availments of $13.5 billion, mainly by the national government and private non-banks; transfer of Philippine debt paper from residents to non-residents of $1.1 billion; prior periods’ adjustments of $687 million; and positive FX revaluation of $390 million.