Phl external debt up 1.7% to $62.5 B

MANILA, Philippines - The Philippines’ external debt inched up as of the first semester compared to last year, but it remains to be at a manageable level as economic growth far outpaces the accumulation of foreign obligations, the Bangko Sentral ng Pilipinas (BSP) reported yesterday. External debt – which encompasses registered borrowings by Philippine residents from non-residents – rose 1.7 percent to $62.5 billion as of the first half of the year from $61.4 billion a year ago. Compared to the first quarter level, however, liabilities slightly declined from $62.9 billion. Despite the increase in nominal value, external debt as a proportion of gross domestic product (GDP) in fact slipped to 26.6 percent from 28.8 percent a year ago. The six-month figure was also a decrease from 27.4 percent recorded in the first three months of the year. GDP is the sum of the value of all products and services produced within an economy. As of June, Philippine GDP grew 7.7 percent in a nominal basis. Thus, a lower external debt-to-GDP ratio means the country has generated more resources that are more than enough to cover its external obligations. “This is a fundamental shift from years ago when our external debt accounted for more than 50 percent of our GDP. This further reduces our vulnerability from global shocks and provides a big buffer for us to respond to sudden stops of inflows,” BSP assistant governor Cyd Tuaño-Amador told reporters. In a statement, BSP said the year-on-year increase was mainly due to more investments by non-residents in Philippine securities amounting to $1 billion, “indicating strong and sustained investor confidence in the country.” When a country issues a security, it is in effect borrowing money from investors. On the other hand, the monthly decrease in our debt stock was mainly due to $800 million worth of net repayments by both public and private sector entities and “audit adjustments” made as the US dollar weakens against the yen. The external debt portfolio was also “predominantly medium- to long-term in tenor,” the statement said, which means most liabilities are not bound to be paid within a year, giving the country more time to settle them. A total of 88.8 percent of external obligations, equivalent to $55.5 billion, had an average tenor of 20.5 years, data showed. Short-term external debts—those that are to mature in one year—accounted for the balance of $7 billion. Also, the government continued to borrow more externally than the private sector, the statement said. Public sector external debt amounted to $48.4 billion, while private entities’ debt stock reached $14.1 billion as of June. - By Prinz P. Magtulis