The Philippines’s external debt declined by nearly a billion dollars as of end-June after the United States Federal Reserve tightened monetary policy in the second quarter, according to the Bangko Sentral ng Pilipinas (BSP).
Data showed the country’s total external debt (EDT) stood at $117.9 billion as of end-June. This is lower by $894 million or 0.8 percent from the $118.8 billion recorded in March.
BSP said this brought the external debt ratio—EDT expressed as a percentage of GDP—to 28.5 percent from the previous quarter’s 29 percent.
“The decline in the debt level during the second quarter was due mainly to the impact of the US Dollar appreciation against other currencies amid further monetary policy tightening by the Federal Reserve,” BSP said.
A stronger dollar, the BSP said, reduced the value of the country’s borrowings denominated in other currencies to $963 million.
The sale of Philippine debt papers by non-residents to residents also decreased the debt stock by $305 million. These offset prior periods’ adjustments of $264 million and net availments of $110 million.
BSP also said the country’s debt stock rose by $10.2 billion. Part of the increase was driven by total net availments of $7.8 billion, the bulk of which were from the National Government (NG) at $7.9 billion.
The BSP added there was a change in the scope of the external debt to include nonresidents’ holdings of Peso-denominated debt securities issued onshore at $3.7 billion while there were also prior periods’ adjustments of $312 million.
“The transfer of Philippine debt papers issued offshore from non-residents to residents of $1.3 billion and negative FX revaluation of $295 million partially tempered the year-on-year increase in the debt stock,” BSP said.
Maturity
The government’s medium and long-term debts (MLT) are expected to mature before babies born this year will be allowed to vote.
BSP estimated that the weighted average maturity for all MLT accounts remained at 17.3 years.
Public sector debts have a longer average term of 20.1 years while private sector debts have an average maturity of 7.2 years.
“ST [short term] accounts—or those with original maturities of up to one year—accounted for 14.7 percent of the outstanding debt stock and comprised mainly of bank liabilities, trade credits and others,” BSP said.
Meanwhile, more than half or 57.2 percent of the country’s MLT debts have fixed interest rates. BSP said these debts amount to $57.5 billion.
The remaining 41.2 percent or $41.4 billion have variable interest rates and 1.7 percent or $1.7 billion are non-interest bearing MLT debts.
BSP data showed public sector external debt went up to $74.5 billion or $686 million in the second quarter of 2023 from the previous quarter’s $75.2 billion.
Its share to total slightly dropped to 63.2 percent from 63.3 percent a quarter ago. About $67.7 billion or 90.9 percent of public sector obligations were NG borrowings.
The remaining $6.8 billion of these debts were borrowings of government-owned and controlled corporations, government financial institutions and the BSP.
In terms of private sector debt, data showed it declined by $208 million to $43.4 billion as of end-June 2023 from $43.6 billion as of end-March 2023. However, BSP said its total share increased slightly to 36.8 percent in June from 36.7 percent in March.
This was driven mainly by net repayments of $630 million and negative FX revaluation of $67 million, offsetting the impact of prior periods’ adjustments of $263 million and the sale of Philippine debt papers by residents to non-residents of $226 million.
Creditors
BSP said the top creditors of Filipinos were the citizens of Japan which accounted for $13.3 billion of loans; the people of the United States of America, $4.1 billion; and those in the United Kingdom, $3.7 billion.
The central bank said loans from official sources had the largest share at 37.9 percent out of the total outstanding debt.
These loans are composed of debts secured from multilateral sources which reached $32 billion and those from bilateral creditors that amounted to $12.6 billion.
Apart from official debts, BSP said borrowings in the form of bonds/notes reached $40.7 billion or 34.5 percent and obligations to foreign banks and other financial institutions at $25 billion or 21.2 percent.
BSP said the rest of the loans worth $7.5 billion or 6.4 percent were owed to other creditors composed mainly of suppliers/exporters.
In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar worth $90.4 billion or 76.7 percent of total and Japanese Yen at $9.3 billion or 7.9 percent of total.
The remaining share of 15.4 percent pertained to 16 other currencies, including the Philippine Peso, the Euro, and Special Drawing Rights.
External debt slides to $117.9B at end-June
Source: News Paper Radio
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