Philippines’ external debt hits $106.4 billion

MANILA, Philippines — The Philippines’ foreign bonds rose 8.1% to $106.43 billion last year as the national government borrowed more, including from the International Monetary Fund’s emergency reserve fund ( IMF), to finance the country’s response measures to COVID-19. .

BSP Governor Benjamin Diokno said the increase was due to net revenues of $9.8 billion after the national government borrowed more from foreign creditors and prior period adjustments of $3.8 billion. of dollars.

Diokno said the rise was partially offset by increased resident investment in foreign-issued debt securities of $3.7 billion and a negative currency revaluation of $2 billion as the dollar was strengthening against other currencies such as the Japanese yen and the euro.

The country’s external debt has steadily increased from $73.1 billion in 2017, $78.96 billion in 2018, $83.62 billion in 2019 and $98.49 billion in 2020 .

Despite the increase, the PASB chief said the country’s outstanding external debt remains at a cautious level, with its ratio to gross domestic product (GDP) standing at 27% in 2021 from 27.2% in 2020. .

“The ratio remains one of the lowest, compared to other ASEAN member countries,” Diokno said.

He said the country’s Gross International Reserves (GIR) level stands at $108.8 billion in 2021, which is equivalent to 7.2 times the short-term debt coverage.

The Philippines emerged from the pandemic-induced recession with GDP growth of 5.6% last year, reversing the 9.6% contraction in 2020 as the economy stalled due to strict COVID protocols -19 and containment measures.

The data showed the debt service ratio increased to 7.2% last year from 6.7% in 2020 due to higher payments. The ratio, which relates principal and interest payments to exports of goods and receipts from services and primary income, is a measure of the adequacy of the country’s foreign exchange earnings to meet maturing obligations.

For the fourth quarter of 2021, the country’s external debt increased by 0.5% from $105.9 billion in the previous quarter.

The data showed that public sector external debt decreased by 2% to $63.9 billion at the end of December 2021, from $65.2 billion at the end of September, which represents 60% of the country’s external debt.

The national government accounted for 86.7% or $55.4 billion of total public sector debt, while state-owned and controlled corporations, government financial institutions and the central bank accounted for the remaining 13.3% or $8.5 billion.

Meanwhile, foreign private corporate bonds rose 4.4% to $42.5 billion at end-December from $40.7 billion at end-September for a 39.9% share.

According to the BSP, the main creditor countries are Japan with 14.6 billion dollars, followed by the United States with 3.8 billion dollars, the United Kingdom with 2.8 billion dollars and the Netherlands with 2. .8 billion dollars.

Borrowings from multilateral lending institutions and bilateral creditors emerged as the largest share at 37.2%, followed by loans in the form of bonds or notes at 34.7% and obligations to foreign banks and others. financial institutions with 22.3%.

The remaining 5.8% was due to other creditors such as suppliers and exporters.

In terms of currency mix, the country’s outstanding debt remained largely denominated in US dollars at 55.4% and Japanese yen at 9.8%. Multi-currency loans denominated in US dollars from the World Bank and the Asian Development Bank accounted for 19.6%.

The data showed that the country’s external debt maturity profile remained predominantly medium to long term in nature with original maturities of more than one year with a total share of 85.8%, while Short-term accounts with maturities up to one year accounted for 14.2%. balance.

“This means that the foreign exchange requirements for debt payment are well distributed and therefore manageable,” Diokno said.

The national government borrows heavily from foreign and domestic creditors to finance the country’s budget deficit, as it spends more than it actually earns.

The country’s budget deficit hit a record 1.67 trillion pesos in 2021 as the pandemic-induced recession drove revenues down, while spending soared to fund COVID-19 response measures. .

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