RP's net liability position with rest of world rises

The Bangko Sentral ng Pilipinas (BSP) reported on Wednesday that the country’s net liability position with the rest of the world improved significantly in 2007 as the strong peso allowed significant prepayment of external debt.

The BSP released on Wednesday for the first time its report on the 2007 International Investment Position (IIP) of the Philippines.

Based on preliminary IIP data as of end-December 2007, numbers showed a significant improvement in the country’s net liability position at $27.4 billion compared with $31.3 billion in end-2006. 

The BSP explained that the IIP was a companion framework to the balance of payments (BOP) statistics which was the record of the country’s transactions or flows with the rest of the world for a given period.

The IIP, on the other hand, summarizes the country’s stock of financial claims and financial liabilities to the rest of the world as of a specific reporting period.  Unlike the BOP, which was reported quarterly, the BSP said it would be releasing the IIP annually with a lag of nine months. 

Similar to the BOP, however, the assets and liabilities in the IIP were classified broadly as direct investments, portfolio investments and other investments.

The BSP said this was reflected on the increase in the total financial assets or claims of residents from the rest of the world recorded at 33.1 percent.

The BSP said total financial assets and claims were recorded at $67.1 billion, while total external financial liabilities rose by only 15.5 percent to $94.4 billion.

The BSP said the improvement in the net IIP reflected the stronger external payments position in 2007, with the BOP posting a surplus of $8.6 billion, or $4.8 billion higher than the $3.8 billion surplus registered in 2006.

The BSP explained that higher foreign exchange receipts allowed residents to build up their financial assets and repay ahead of their maturities some foreign obligations of both public and private borrowers.

By sectoral classification, the BSP and banks as a group recorded net external asset positions at end-December 2007.

In particular, the BSP said its own net external asset position improved by 48.3 percent as of end-December 2007 to $33.5 billion, from the year-ago level of $22.6 billion. 

“Ample foreign exchange liquidity allowed the BSP to accumulate reserve assets and prepay some of its borrowings,” the BSP said.

On the other hand, the net asset position of banks also strengthened to $6.7 billion in 2007 compared with $6.3 billion in 2006.

On the other hand, the General Government and Other Sector continued to be net users of foreign resources, with net liability positions of $29.3 billion and $38.2 billion, respectively.