BSP sets deadline on 2021 foreign borrowing plans

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is reminding government and private entities to submit not later than the end of next month their foreign borrowing plans for next year.

The central bank conducts an annual survey to get an indication of the magnitude and timing of the economy’s financing requirements for the following year as well as the purpose of such borrowings.

This is in line with the BSP’s responsibility to monitor capital flows and analyze their implications on the economy.

“In line with the BSP mandate on external debt management, all public and private resident entities are required to submit their foreign borrowing plan for 2021 not later than Sept. 30,” the central bank said.

The requirement covers entities that intend to maintain medium- and long-term foreign loans from offshore sources such as banks, parent companies, affiliates or shareholders including offshore issuances of debt instruments.

Likewise, public and private entities planning to issue onshore debt instruments that require settlement in foreign currency are also covered.

Capital flows affect the foreign exchange market. The peso is one of the strongest performing currencies in the region amid the coronavirus disease 2019 or COVID-19 pandemic.

The local currency gained over three percent to close at 48.68 to $1 last Thursday, its strongest level in almost four years.

The country’s external debt inched up by 1.2 percent to $81.42 billion in the first quarter of the year from $80.43 billion in the same quarter last year and is seen rising further as the Philippines turn more to the offshore debt market for more funds to soften the blow of the COVID-19 pandemic.

Public sector external debt reached $45.1 billion and accounted for more than half or 55.4 percent of the country’s foreign debt, while the external debt of private companies amounted to $40.8 billion for a share of 44.6 percent.

BSP Governor Benjamin Diokno said earlier the country’s external debt is expected to remain manageable amid increased foreign borrowings to support the national government’s efforts to address the impact of the pandemic.

“Despite foreign borrowings done in the past seven months, the economy continues to have the capability to service its maturing foreign obligations. This is in view of the country’s markedly improved external debt manageability achieved through 20 years of critical structural reforms,” Diokno said.

He added the Philippines entered the period of health quarantines with a robust external debt position.

The first quarter external debt figure represented 21.4 percent of gross domestic product (GDP), much lower than the 57.3 percent recorded 15 years earlier, reflecting the country’s sustained strong position to service foreign borrowings.

Aside from this, 83.6 percent of the country’s external debt as of March medium to long term, 57.8 percent of which have fixed interest rates.

The national government borrows heavily from foreign and domestic creditors to finance the country’s budget deficit as it spends more than what it actually earns.

Economic managers are now expecting a wider budget deficit of 8.4 percent of gross domestic product (GDP) instead of the original 3.2 percent of GDP as revenue collections would drop 16.7 percent and disbursements jump by 11.3 percent this year due to the pandemic.

They are expecting a higher debt-to-GDP ratio of 49.8 percent this year, 51.5 percent next year, and 52.3 percent in 2022 due to additional borrowings.