Phl external debt remains prudent

Despite the increase in foreign obligations, the country’s external debt remains within prudent and manageable levels.

The country’s external debt climbed a percent higher in the second quarter this year to $81.3 billion compared to only $80.4 billion at end-March.

This was learned from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno who said the latest number was 12.55 percent higher than foreign debt of only $72.19 billion at end-December 2018.

According to the central bank, the increase may be owed to the increase in non-residents’ investments in Philippine securities issued abroad reaching $1.2 billion, and to positive foreign exchange (FX) valuation adjustments of another $405 million.

However, net repayments totaling $650 million and so-called prior adjustments of $133 million partially tempered the uptick in the debt stock.

Despite the increase in foreign obligations, the country’s external debt remains within prudent and manageable levels.

External debt refers to all types of borrowings by residents from non-residents, following the residency criterion for international statistics.

As of end-June 2019, bulk of the country’s external debt were medium- and long-term (MLT) or those with maturities of more than a year, with its share to total at 80.8 percent.

Short-term loans, or those with maturities of less than a year, accounted for the remaining 19.2 percent of the overall stock and comprised of bank liabilities, trade credits and others.

“The weighted average maturity for all MLT accounts was at 16.8 years similar to the previous quarter, with public sector borrowings having a longer average term of 20.8 years compared to 7.7 years for the private sector,” the BSP said.

“This means that FX requirement for debt payments are well spread out and, thus, more manageable,” it added.

Public sector borrowings in the second quarter grew to $42.3 billion from $40.2 billion in the previous quarter. Of the total, government borrowings took the lion’s share of $35.2 billion while the remaining $7 billion pertained to other government agencies’ loans.

Private sector debt, on the other hand, declined from $40.3 billion as of end-March 2019 to just $39 billion at end-June 2019 primarily due to the reduction of bank liabilities.

The country’s major creditors were Japan with $15.1 billion, followed by the United States of America with $4 billion, the Netherlands with $3.2 billion and United Kingdom with $3 billion.