Foreign debt stock fell to $53.5B in Q3
Philippine Daily Inquirer
MANILA, Philippines – The Philippines’ foreign debt burden fell by $1.3 billion in the third quarter to $53.5 billion from $54.8 billion in the previous quarter, as local borrowers reduced their foreign currency exposure in view of the peso’s weakening against the dollar.
The country’s outstanding external debt as of end September was also lower than the $54.4 billion recorded in the same quarter last year, a Bangko Sentral ng Pilipinas report showed.
About 72 percent of the external debt stock represented public sector borrowings while the rest was contracted by the private sector.
External debt refers to all types of borrowings of Philippine residents from non-residents that were approved and/or registered by the Philippine central bank.
“The decline in the external debt stock was accompanied by a continuing improvement in the country’s external debt related ratios,” BSP Governor Amando M. Tetangco Jr. said in a press statement.
The substantial reduction in the debt stock during the third quarter was attributed by the BSP to the overall net principal repayments made by both the public and private sectors that summed up to $1.3 billion. This amount included a $511-million prepayment of debt made by state-owned National Power Corp.
In the last two years, local borrowers took advantage of the peso’s uptrend against the dollar to prepay debts. But even with the local currency losing steam, the data suggested that some would like to cut down their exposure to hedge against the possibility of further peso depreciation.
A weaker peso increases the peso equivalent of debts denominated in dollars. It likewise jacks up the cost of servicing foreign currency-denominated debt.
Classified by currency, dollar-denominated accounts accounted for more than half of the debt stock (53 percent) while Japanese yen-denominated accounts accounted for 26.8 percent. Multi-currency loans from the Asian Development Bank and the World Bank accounted for 9.3 percent, and the rest of the accounts, which were in 18 other currencies, accounted for 10.9 percent.
Year-on-year, the country’s debt stock declined by $945 million, also as a result of net principal repayments, which reached $3.3 billion.
The increase in the debt stock compared to a year ago was tempered by the following:
Upward foreign exchange revaluation ($1.5 billion), mainly reflecting the increase in the dollar equivalent of loans denominated in Japanese yen, which has strengthened vis-a-vis the US dollar.
Increased holdings of Philippine debt papers by non-residents ($442 million).
Upward audit adjustments ($404 million).
Prepayments of external debt accounts during the 12-month period ending September amounted to $1.8 billion. A big portion of the prepayment was accounted for by Napocor and commercial banks for their tier 2 capital issues.
The country’s external debt as a ratio of gross domestic product improved to 31.8 percent at end-September from 40.2 percent a year ago.
“Since 2002, the ratio has followed a downward trend, indicating a sustained improvement in the country’s capacity to service its maturing foreign obligations,” the BSP said.
The external debt service ratio–or the percentage of total principal and interest payments to total exports of goods and receipts from services and income (which include remittances of overseas Filipino workers)–was estimated at 10.1 percent in January to September 2008, lower than the 10.5 percent in the same period last year.
“The country’s debt service ratio has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period,” the BSP said.
The maturity profile of the country’s external debt remained predominantly medium to long term, which accounted for 84.5 percent of the total.
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Debt Settlement company
Appreciate the info guys, thanks
Mar 20th, 2009
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