BSP confident external debt ratio in ’21’ at cautious levels’

The Bangko Sentral ng Pilipinas (BSP) remained confident that the country’s outstanding external debt ratio remained “at cautious levels” at the end of last year.

In a report released over the weekend, the BSP said the ratio of the Philippines’ external debt stock to the country’s gross domestic product (GDP) was 27% at the end of December 2021.

External debt, which refers to all types of borrowing by Philippine residents from nonresidents, stood at $106.4 billion at the end of 2021, up $499 million from $105.9 billion. dollars recorded a quarter earlier.

At the end of September last year, the country’s outstanding external debt relative to GDP stood at 27.3%.

The country’s outstanding external debt expressed as a percentage of GDP is an indicator of solvency. A low debt-to-GDP ratio indicates the country’s strong and enduring position to service medium and long-term (MLT) foreign borrowings.

The BSP said the increase in the real stock of debt during the fourth quarter was largely due to net drawdowns of $3.4 billion, as private banks borrowed abroad to invest in high-quality liquid assets, finance their foreign exchange trading activities and increase their capital, while interest rates are low.

This was partly mitigated by the transfer of Philippine debt securities issued abroad by non-residents to residents of $2.4 billion and the negative revaluation of exchange rates by $488 million.

In terms of debt profile, the maturity of the country’s external debt remained predominantly medium to long term in nature, with a total share of 85.8%. Medium and long-term loans are those with an original maturity of more than one year.

On the other hand, short-term accounts, or those with original maturities of less than one year, comprised the balance of 14.2% of outstanding debt and consisted of bank liabilities, trade credits and other .

The weighted average maturity of all MLT accounts remained at 17.2 years, with public sector borrowings having a longer average duration of 20.8 years compared to 7.2 years for the private sector.

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

In terms of currency mix, the country’s outstanding debt remained largely denominated in US dollars (55.4%) and Japanese yen (9.8%).

Multi-currency loans denominated in US dollars from the World Bank and the Asian Development Bank accounted for 19.6% of the total. The balance of 15.2% was in 14 other currencies, including the euro, Philippine peso and special drawing rights.

Sallie R. Loera