PHL’s external debt remains at prudent levels in Q3 of 2023

Total external debt (EDT) stood at US$118.8 billion as of end-September 2023, up by US$915 million (or 0.8 percent) from the US$117.9 billion level as of end-June 2023.

Despite the increase in the debt stock, the external debt ratio (EDT expressed as a percentage of gross domestic product) improved to 28.1 percent from the previous quarter’s 28.5 percent owing to the economy’s growth during the third quarter.

Other key external debt indicators also remained at manageable levels. Gross international reserves (GIR) stood at US$98.1 billion as of end-September 2023 and represented 5.7 times cover for short-term (ST) debt based on the original maturity concept.

The debt service ratio (DSR), which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, increased to 10.3 percent from 4.8 percent for the same period last year due to higher recorded principal and interest payments in 2023.

The DSR and the GIR cover for ST debt are measures of the adequacy of the country’s foreign exchange (FX) resources to meet maturing obligations.

External Debt

The rise in the debt level was due to prior periods’ adjustments (i.e., borrowings made in previous quarters) amounting to US$2.0 billion, of which US$1.9 billion were borrowings by private sector non-bank firms.

The increase in the debt stock from said adjustments was partially tempered by: (a) negative foreign exchange (FX) revaluation of US$655 million; (b) the sale of Philippine debt papers to residents by non-residents of US$220 million; and (c) net repayments of US$200 million. The recorded net repayments during the quarter pertain largely to the redemption by two (2) local banks of its maturing medium-term notes (US$900 million).

Year-on-year, the country’s debt stock rose by US$10.9 billion (or 10.1 percent).

The increase was driven by: (a) total net availments of US$6.0 billion, bulk of which were borrowings by the National Government (NG, US$7.8 billion); (b) the change in the scope of the external debt to include non-residents’ holdings of Peso-denominated debt securities issued onshore reported in the first quarter of 2023 (US$3.3 billion); (c) prior periods’ adjustments of US$1.5 billion; and (d) positive FX revaluation of US$291 million.

The sale of Philippine debt papers issued offshore by non-residents to residents of US$224 million had a minimal offsetting effect on the year-on-year increase of the debt stock.

Debt Profile

As of end-September 2023, the maturity profile of the country’s external debt remained predominantly medium- and long-term (MLT) in nature [i.e., those with original maturities longer than one (1) year], with share to total at 85.6 percent (US$101.7 billion).

Relative to previous quarter, the weighted average maturity for all MLT accounts slightly declined to 17.2 years from 17.3 years, with public sector borrowings having longer average tenor of 20.3 years versus 7.2 years for the private sector.

On the other hand, ST liabilities [or those with original maturities of up to one (1) year] accounted for 14.4 percent of the outstanding debt stock and comprised mainly of bank liabilities, trade credits, and other liabilities.

Of the MLT accounts, 54.6 percent (US$55.5 billion) have fixed interest rates, 43.5 percent (US$44.3 billion) carry variable rates, and 1.8 percent (US$1.9 billion) are non-interest bearing.

Public sector external debt decreased to US$73.7 billion (by US$776 million or 1.0 percent) in the third quarter of 2023 from the previous quarter’s US$74.5 billion level. Its share to total likewise dropped to 62.0 percent from 63.2 percent a quarter ago.

The decline in the public sector’s debt level was due largely to negative FX revaluation of US$553 million and the sale of public sector debt papers by non-residents to residents of US$451 million which offset prior periods’ adjustments of US$123 million and net availments of US$105 million.

About US$67.2 billion (91.1 percent) of public sector obligations were NG borrowings, while the remaining US$6.5 billion pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP.

On the other hand, private sector debt rose by US$1.7 billion (3.9 percent) from US$43.4 billion as of end-June 2023 to US$45.1 billion as of end-September 2023, with its share to total likewise increasing from 36.8 percent to 38.0 percent.

The rise in the debt level was driven mainly by: (a) prior periods’ adjustments of US$1.9 billion arising from the late registration application/reporting of borrowings by various private sector borrowers; and (b) the sale of debt securities by residents to non-residents of US$231 million.

Meanwhile, net repayments of US$305 million and negative FX revaluation of US$102 million partially tempered the rise in the private sector debt level.

Major creditor countries were Japan (US$14.8 billion), the United Kingdom (US$4.1 billion), and Singapore (US$3.3 billion).

Loans from official sources [multilateral (US$32.1 billion) and bilateral creditors (US$13.4 billion)] had the largest share (US$45.5 billion or 38.3 percent) of the total outstanding debt, followed by borrowings in the form of bonds/notes (US$38.8 billion or 32.7 percent) and obligations to foreign banks and other financial institutions (US$26.7 billion or 22.5 percent); the rest (US$7.8 billion or 6.6 percent) were owed to other creditors (mainly suppliers/exporters).

In terms of currency mix, the country’s debt stock remained largely denominated in US dollar (US$91.5 billion or 77.0 percent of total) and Japanese yen (US$9.5 billion or 8.0 percent of total).

The rest (US$17.7 billion or 14.9 percent) pertained to 14 other currencies, including the Philippine peso (6.4 percent), the Euro (4.8 percent), and Special Drawing Rights (3.2 percent).