The country’s outstanding external debt widened to $92 billion as of the third quarter of 2020 from amounts in the second quarter and a year earlier, the Bangko Sentral ng Pilipinas (BSP) announced on Friday as it assured that the government is still capable of paying it off.
In a statement, the central bank said the end-September figure was $4.5 billion or 5.2 percent higher than end-June’s $87.5 billion.
It attributed the increase to “net availments of $2.8 billion by private nonbanks to augment its working capital and $2.4 billion by the national government to fund its Covid-19 (coronavirus disease 2019) pandemic response programs [and] projects and various infrastructure development projects.”
The increase was also traced to the positive foreign-exchange revaluation of $636 million, as the US dollar weakened against other currencies on the slowdown in the United States’ economic recovery and tensions between Washington and Beijing during the quarter; and increase in nonresidents’ investments in Philippine debt papers issued offshore, valued at $294 million.
The expansion was partially offset by the prior periods’ adjustments of $2.1 billion.
The debt stock rose by $9.3 billion from end-September 2019 because of the $5 billion in net availments, mainly by the government; $2.8-billion transfer of Philippine debt papers from residents to nonresidents as several credit rating agencies affirmed their confidence in the economy during the period; $936-million positive foreign-exchange revaluation; and $645 million in adjustments in prior periods.
At a virtual briefing, BSP Deputy Governor Francisco Dakila Jr. said “about 52 percent of the total external debt is accounted for by the national government’s external borrowings.” He added that key external debt indicators “remained at comfortable levels,” as the external debt-to-gross domestic product (GDP) ratio in the country stood at 25.3 percent and the government’s external debt-to-GDP ratio at 13.2 percent as of end-September.
“This implies that the country remains in a strong position to service foreign obligations in the medium to long term,” Dakila explained.
As a percentage of annual aggregate output, the external debt ratio (EDT) jumped to 25.3 percent from 23.7 percent a quarter ago as the country’s GDP contracted by 11.5 percent,
while foreign obligations rose during the reference quarter.
The country’s EDT-to-GDP ratio remained one of the lowest in Southeast Asia, according to the central bank.
The country’s debt service ratio (DSR) climbed to 7 percent from 6.4 percent a year earlier, with the BSP saying it “has consistently remained at single-digit levels.”
The DSR ratio measures the country’s adequacy to meet its obligations, based on foreign-exchange earnings, by relating principal and interest payments to merchandise exports and receipts from services and primary income.