Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno announced that the Philippines’ outstanding external debt (EDT) remained at a prudent level as its ratio to Gross Domestic Product (GDP) recorded at 27.0 percent at end-December 2021.
The ratio remains one of the lowest as compared to other ASEAN member countries. The country’s EDT expressed as a percentage of GDP is a solvency indicator.
The low EDT to GDP ratio indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term (MLT).
The Governor further said that other key external debt indicators also remained at prudent levels. Gross International Reserves (GIR) stood at US$108.8 billion as of end-2021 and represented 7.2 times cover for short-term (ST) debt based on the original maturity concept.
The debt service ratio (DSR) increased to 7.2 percent in 2021 from 6.7 percent in 2020 due largely to higher payments.
The DSR, which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange (FX) earnings to meet maturing obligations.
External Debt
External debt, which refers to all types of borrowings by Philippine residents from non-residents (following the residency criterion for international statistics), stood at US$106.4 billion as of end-2021, up by US$499 million (or 0.5 percent) from the US$105.9 billion recorded a quarter earlier.
The rise in the debt stock during the fourth quarter was due largely to net availments of US$3.4 billion as private banks borrowed offshore to invest in high quality liquid assets, fund their FX trading activities, and augment their capital, while interest rates are low.
This was partly tempered by the: (a) transfer of Philippine debt papers issued offshore from non-residents to residents of US$2.4 billion; and (b) negative FX revaluation of US$488 million.
Year-on-year, the country’s debt stock rose by US$7.9 billion (or by 8.1 percent) brought about by net availments of US$9.8 billion, mainly by the National Government (NG) and prior periods’ adjustments of US$3.8 billion.
These were partially offset by the increase in residents’ investments in debt papers issued offshore of US$3.7 billion and negative FX revaluation of US$2.0 billion as the US Dollar strengthened against other currencies such as the Japanese Yen and the Euro.
Debt Profile
As of end-December 2021, the maturity profile of the country’s external debt remained predominantly MLT in nature [i.e., those with original maturities longer than one (1) year], with share to total at 85.8 percent.
On the other hand, ST accounts [or those with original maturities of up to one (1) year] comprised the 14.2 percent balance of debt stock and consisted of bank liabilities, trade credits and others.
The weighted average maturity for all MLT accounts remained at 17.2 years, with public sector borrowings having a longer average tenor of 20.8 years compared to 7.2 years for the private sector. This means that FX requirements for debt payments are still well spread out and, thus, manageable.
Public sector external debt decreased to US$63.9 billion or by US$1.3 billion (2.0 percent) from US$65.2 billion in the previous quarter.
About US$55.4 billion of public sector obligations were NG borrowings while the remaining US$8.5 billion pertained to loans of government-owned and controlled corporations, government financial institutions and the BSP.
Private sector debt grew from US$40.7 billion as of end-September 2021 to US$42.5 billion as of end-December 2021, with share to total likewise increasing from 38.4 percent to 39.9 percent. The rise was due largely to net availments of US$2.5 billion by private banks, which was partially offset by transfers of Philippine debt papers from non-residents to residents (US$822 million).
Major creditor countries were: Japan (US$14.6 billion), United States of America (US$3.8 billion), United Kingdom (US$2.8 billion), and The Netherlands (US$2.8 billion).
Loans from official sources [multilateral and bilateral creditors (comprised of Japan – US$8.7 billion; China – US$1.5 billion; and France – US$677 million, among others)] had the largest share (37.2 percent) of total outstanding debt, followed by borrowings in the form of bonds/notes (34.7 percent) and obligations to foreign banks and other financial institutions (22.3 percent); the rest (5.8 percent) were owed to other creditor types (mainly suppliers/exporters). Creditor mix continues to be well-diversified.
In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (55.4 percent) and Japanese Yen (9.8 percent). US Dollar-denominated multi-currency loans from the World Bank and Asian Development Bank represented 19.6 percent of total. The 15.2 percent balance pertained to 14 other currencies, including the Euro, Philippine Peso and Special Drawing Rights.
