Foreign debt dwindles 19 % in H1

MANILA, Philippines - The country’s external debt fell 19 percent in the first six months due to the continued weakening of regional currencies against the dollar, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said the country’s external debt reached $74.998 billion from January to June, $3.6 billion lower compared to $78.59 billion in the same period last year.

External debt refers to all types of borrowings by Philippine residents from non-residents following the residency criterion for international statistics such as the Balance of Payments (BOP).

Tetangco traced the decline to negative foreign exchange revaluation adjustments amounting to $2.6 billion as the US economy continued to gradually recover resulting in a stronger dollar.

The BSP chief also cited the increase in residents’ investments in Philippine debt papers amounting to $835 million as well as the previous periods’ adjustments resulting to a $134 million reduction.

Data also showed the country’s external debt in end June declined $321 million from the end-March level of $75.3 billion due to the transfer of Philippine debt papers from non-residents to residents amounting to $1 billion amid growing concerns about the anticipated rate hike by the US Fed.

The BSP also noted the $162 million negative foreign exchange revaluation adjustment amid the continued weakening of the Japanese yen against the dollar.

Japan has allowed its currency to weaken against the greenback as part of efforts to revive its economy by helping exporters become more competitive.

On the other hand, the government availed of $875 million in net loans in the first half of the year, slightly offsetting the decline in the country’s external debt.

According to Tetangco, the country’s external debt ratio improved to 21.3 percent in end-June from 23.5 percent in the same period last year, while debt service ratio also improved to 5.9 percent from 6.9 percent.

The external debt ratio is a solvency indicator while the debt service ratio is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing obligations.

“Key external debt indicators were observed to have remained at very prudent levels in the second quarter of 2015,” Tetangco said.

Tetangco said the country’s foreign exchange requirements for debt payments are well spread out and more manageable as 82.4 percent of the total external debt are medium- to long-term accounts with maturities longer than one year.

The weighted average maturity for these accounts stood at 16.8 years with public sector borrowings having a longer average tenor of 22.5 years compared to 8.1 years for the private sector.

On the other hand, short-term debt comprised the 17.4 percent bvalance of the debt stock, consisting largely of bank borrowings, intercompany accounts of foreign bank branches, trade credits, and deposits of non-residents.