BSP reassured that PH external debt remains within prudent levels

The Bangko Sentral ng Pilipinas (BSP) recently announced that despite additional borrowings, the country’s external debt ratios remained at manageable levels by the end of last year. The total external debt reached $125.4 billion in 2023, up from $111.27 billion in 2022. This increase occurred alongside the expansion of the gross domestic product (GDP), which grew to $436.6 billion from $404.3 billion in the previous year.

As a percentage of GDP, external debt increased slightly to 28.7% from 27.5% at the end of 2022. However, the country’s debt service ratio (DSR) rose to 10.2% from 6.3%, mainly due to rising interest rates leading to higher principal and interest payments.

Despite these figures, the BSP pointed out that the gross international reserves (GIR) stood at a healthy $103.8 billion, providing a cover of 6.1 times for short-term (ST) debt, up from $96.15 billion in 2022. This signifies the adequacy of the country’s foreign exchange (FX) resources to meet maturing obligations.

The rise in external debt was primarily attributed to net availments of $4.9 billion by both private and public sector borrowers. Notably, a non-bank firm secured a $3.0-billion syndicated loan in the first quarter of 2023 for capital expenses and existing obligations. Additionally, the national government launched a $1-billion, 5.5-year dollar-denominated Sukuk bond to support various financial needs, infrastructure projects, and social welfare programs.

Positive foreign exchange revaluations of debt denominated in other currencies, along with net purchases of Philippine debt securities by non-residents, contributed to the increase in the country’s debt stock by $960 million and $816 million, respectively. However, adjustments from previous periods amounting to $98 million partially offset this rise.

Year-on-year, the country’s debt stock increased by $14.1 billion or 12.7%, mainly due to national government net borrowings of $7.9 billion, a change in the scope of external debt, and prior years’ adjustments.

External debt remained predominantly medium- and long-term (MLT), accounting for 86.4% of the total, with a weighted average maturity of 16.7 years. Public sector borrowings had a longer average tenor of 19.6 years compared to the private sector’s 7.7 years.

Short-term liabilities constituted 13.6% of the existing debt stock, primarily composed of bank liabilities, trade credits, and other liabilities. Most MLT accounts had fixed interest rates (54.9%), while 43.4% carried variable rates, and 1.7% were non-interest bearing.

Public sector external debt increased to $77.8 billion in the fourth quarter, with national government borrowings comprising the majority at $71.0 billion. Private sector debt rose to $47.6 billion, mainly attributed to borrowings by local banks and private non-bank entities.

Japan, China, and the United Kingdom emerged as the top creditors. Loans from official sources accounted for the largest share of total outstanding debt at 38.5%, followed by bonds and notes (32.7%), obligations to foreign banks and other financial institutions (22.9%), and other creditors (6.0%).

The Philippines’ debt stock remained primarily denominated in dollars (75.3%) and yen (9.0%), with 15.6% in 18 other currencies, including the euro, Philippine peso, and special drawing rights with the International Monetary Fund.

Business News: BSP reassured that PH external debt remains within prudent levels