Foreign debt stock down 1.4 percent

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The debt service ratio (DSR) improved to 6.1 percent from 7.8 percent in the first quarter this year and from 6.7 percent as of end-June 2017.

The country’s external debt improved by almost $1 billion in the second quarter or 1.4 percent lower to only $72.2 billion, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said on Friday.

The reduction from $73.2 billion in the previous quarter was primarily driven by so-called negative revaluation adjustments on foreign exchange (FX) of $720 million following the sustained strength of the US dollar against third currencies.

This, in addition to the decline in non-resident investments of $309 million in Philippine debt papers and net principal payments of $246 million, further contributed to the external debt stock downtrend.

According to the BSP, the debt stock declined by $294 million from $72.5 billion in June 2017. This translates to 0.4 percent downtick year-on-year.

It also noted several factors that brought this offset: (a) net principal repayments (US$2.4 billion), primarily on private sector’s short-term (ST) bank liabilities; vis-a-vis (b) prior periods’ adjustments (US$1.8 billion) due to late reporting; and (c) transfer of Philippine debt papers from residents to non-residents (US$419 million).

Also, the country’s external debt were principally medium-to-long-term (MLT) contributing 83.2 percent to total external debt while short-term loans accounted for the remaining 16.8 percent, which was mainly comprised of bank liabilities and trade credits.

As a result, the BSP said the “FX requirements for debt payments are well spread out and, thus, more manageable.”

Likewise, public sector external debt was reduced by $1.2 billion from $39.2 billion in the first quarter of 2018 to $38.0 billion as of end-June 2018 accounting for 52.6 percent of total external debt.

In contrast, the private sector external debt displayed a slight uptick reaching $34.2 billion from the previous $34.0 billion.

The debt service ratio (DSR) improved to 6.1 percent from 7.8 percent in the first quarter this year and from 6.7 percent as of end-June 2017.

With these figures, Espenilla said the key external debt indicators continued to improve in the second quarter this year given gross international reserves (GIR) of $77.5 billion as of end-June this year.

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