Philippines’ outstanding external debt went up 8.1 percent or by $7.94 billion to $106.43 billion in 2021 from $98.49 billion in 2020, of which public sector debt accounted for bulk of foreign loans.
Based on a Bangko Sentral ng Pilipinas (BSP) report, the increase in the external debt year-on-year came from a $9.8-billion net availments, mainly by the National Government (NG) and prior periods’ adjustments of $3.8 billion.
“These were partially offset by the $3.7 billion increase in residents’ investments in debt papers issued offshore and the $2 billion negative FX (foreign exchange) revaluation as the US dollar strengthened against other currencies such as the Japanese yen and the Euro,” said the BSP.
External debt on a quarter-on-quarter basis was slightly higher by $499 million or 0.5 percent from $105.9 billion end-September 2021. There was net availments of $3.4 billion.
“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,” said the BSP. This was partly offset by the following: transfer of Philippine debt papers issued offshore from non-residents to residents of $2.4 billion; and $488 million negative FX revaluation.
Last year, of the $106.43 billion external debt, the public sector accounted for $63.9 billion, 60 percent of the total. The end-December public sector external debt was 9.99 percent higher from 2020’s $58.12 billion.
The BSP said about $55.4 billion or 86.7 percent of public sector obligations were NG borrowings while the remaining $8.5 billion were loans of government-owned and/or controlled corporations, government financial institutions and the BSP.
Private sector external debt, meantime, increased by 5.25 percent year-on-year to $42.94 billion from $40.37 billion in 2020. It accounted for 39.9 percent of the total.
The external debt continue to be at prudent levels in terms of GDP ratio of 27 percent both in 2021 and 2020. As a solvency indicator, the BSP said the low GDP ratio still “indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term (MLT).”
At end-2021, the debt service ratio (DSR) increased to 7.2 percent from 6.7 percent in 2020 from higher payments. The DSR shows the country’s FX adequacy to meet maturing obligations.
The debt service burden, on the other hand, amounted to $8.78 billion in 2021, up by 16.6 percent from $7.53 billion in 2020. Principal payments totalled $6.60 billion, up from $4.95 billion in 2020, while interest payments amounted to $2.18 billion, down from $2.59 billion.
The maturity profile of the external debt is still “predominantly MLT in nature or those with original maturities longer than one year, with share to total at 85.8 percent.”
“This means that FX requirements for debt payments are still well spread out and manageable,” the BSP reiterated.
The MLT weighted average maturity was 17.2 years with public sector borrowings having a longer period of 20.8 years compared to the private sector’s 7.2 years. The short-term liabilities, meantime, accounted for 14.2 percent of the debt stock and consisted of bank liabilities, trade credits and others.
The country’s major creditor countries continue to be Japan with $14.6 billion, the US with $3.8 billion, United Kingdom with $2.8 billion, and The Netherlands with $2.8 billion.
Japan also leads as creditor of official loans or loans negotiated as multilateral and bilateral lending with $8.7 billion, followed by China with $1.5 billion, and France with $677 million, among others.
Multilateral and bilateral loans represented 37.2 percent of total external debt while borrowings in the form of bonds/notes accounted for 34.7 percent and 22.3 percent were obligations to foreign banks and other financial institutions.
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