Foreign debt hits fresh high of $148. 9 billion

MANILA, Philippines, September 21 ------ The country’s outstanding external debt climbed to a fresh record high of $148.87 billion as of end-June, but the Bangko Sentral ng Pilipinas said the debt remains sustainable, with key indicators showing manageable levels.

The latest figure was 1.5 percent higher than the previous quarter’s $146.74 billion, mainly due to the weakening of the dollar, which raised the dollar equivalent of borrowings in other currencies by $1.49 billion. The net acquisition of Philippine debt securities worth $660.96 million also contributed to the uptick, partly offset by net repayments of $315.67 million.

Despite the higher figure, the external debt-to-gross domestic product ratio eased to 31.2 percent from 31.5 percent in the first quarter, reflecting an improved debt burden relative to the size of the economy. The Philippines borrows externally to finance public infrastructure, social services and other development programs, as well as to diversify funding sources and take advantage of favorable terms from foreign lenders. Local banks and companies also tap offshore markets to fund expansion and investment needs.

Short-term external debt based on remaining maturity stood at $28.63 billion, well covered by the country’s gross international reserves of $106 billion. This translated to 3.7 times cover, broadly comparable with emerging market peers. The debt service ratio likewise improved to 8.7 percent in the second quarter from 9.8 percent a year ago, supported by lower principal and interest payments. The ratio is another indicator of capacity to service debt that compares the country’s loan payments with its income from exports and other inflows.

On a year-on-year basis, external debt jumped by 14.4 percent, driven by fresh borrowings that included $5.83 billion in bond issuances by the national government and $3.44 billion in external financing tapped by local banks. The external debt stock includes all borrowings by Philippine residents from non-residents and is closely monitored to ensure that the country maintains its creditworthiness and financial stability.

Source: philstar.com