External Debt Ratio Slightly Eases Amid Faster Economic Growth

​Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno announced that the Philippines' outstanding external debt remained at a prudent level as its ratio to Gross Domestic Product (GDP) slightly eased to 26.5 percent at end-June 2021 from 26.6 percent a quarter ago. This is reflective of the faster economic growth in the second quarter.

The Governor further stated that other key external debt indicators also remained at prudent levels. Gross International Reserves (GIR) stood at US$105.8 billion as of end-June 2021 and represented 7.5 times cover for short -term (ST) debt based on the original maturity concept.

For January to June 2021, the debt service ratio (DSR) increased to 9.4 percent from 8.4 percent a year ago due to higher payments. The DSR, which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country's FX earnings to meet maturing obligations.

The country's total outstanding debt (EDT) to GDP ratio remains one of the lowest as compared to other ASEAN member countries.

EDT expressed as a percentage of GDP is a solvency indicator. The low EDT to GDP ratio indicates the country's sustained strong position to service foreign borrowings in the medium to long-term (MLT).

External Debt

External debt, meanwhile, stood at US$101.2 billion at end-June this year, a US$4.1 billion (or 4.3 percent) rise from the US$97.0 billion recorded a quarter earlier.

The rise in external debt was due to net availments of US$3.8 billion, largely attributed to the National Government (NG) as it raised: (a) US$3.0 billion from the issuance of Euro-denominated global bonds and Samurai bonds; and (b) US$1.3 billion from multilateral and bilateral creditors to fund the NG's general financing requirements and COVID-19 pandemic response programs/projects.

Prior periods' adjustments of US$977 million further contributed to the increase of the debt stock. Resident investments in Philippine debt papers issued offshore of US$686 million partly mitigated the rise in the debt level.

Year-on-year, the country's debt stock rose by US$13.7 billion brought about by: (a) net availments of US$14.4 billion, mainly by the NG and private non-banks; and (b) positive FX revaluation of US$205 million. The uptick in the debt level was partly tempered by the: (a) transfer of Philippine debt papers from non-residents to residents of US$438 million; and (b) prior periods' adjustments of US$391 million.

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

Debt Profile

As of end-June 2021, the maturity profile of the country's external debt remained predominantly MLT in nature [i.e., those with original maturities longer than one (1) year], with share to total at 86.0 percent. On the other hand, ST accounts [or those with original maturities of up to one (1) year] comprised the 14.0 percent balance of debt stock and consisted of bank liabilities, trade credits and others. The weighted average maturity for all MLT accounts remained at 17.1 years, with public sector borrowings having a longer average term of 20.6 years compared to 7.4 years for the private sector. This means that FX requirements for debt payments are still well spread out and, thus, manageable.

Public sector external debt stood at US$59.9 billion from US$56.8 billion in the previous quarter. About US$54.3 billion of public sector obligations were NG borrowings while the remaining US$5.7 billion pertained to loans of government-owned and controlled corporations, government financial institutions and the BSP.

Private sector debt grew from US$40.3 billion as of end-March 2021 to US$41.3 billion as of end-June 2021, although the share to total decreased from 41.5 percent to 40.8 percent. The increase was due to prior periods' adjustments of US$954 million by private non-banks and net availments of US$123 million, which were partially tempered by the increase in resident investments in debt papers issued offshore of US$139 million.

Major creditor countries were: Japan (US$15.2 billion); The Netherlands (US$3.3 billion); and United States of America (US$3.3 billion). Creditor mix continues to be well-diversified.

Borrowings in the form of bonds/notes had the largest share (37.5 percent) of total outstanding debt, followed by loans from official sources [multilateral and bilateral creditors (comprised of Japan - US$8.9 billion; China - US$1.2 billion; and France - US$725 million, among others) - 35.2 percent], and obligations to foreign banks and other financial institutions (21.2 percent); the rest (6.2 percent) were owed to other creditor types (mainly suppliers/exporters).

In terms of currency mix, the country's debt stock remained largely denominated in US Dollar (54.8 percent) and Japanese Yen (11.5 percent). US dollar-denominated multi-currency loans from the World Bank and ADB represented 19.3 percent. The 14.3 percent balance pertained to 14 other currencies, including the Philippine Peso, Euro and SDR.