BSP says PHL external debt remains manageable amid modest growth

By Francis Allan L. Angelo

The Philippines’ external debt increased to $130.18 billion at the end of June 2024, reflecting a 1.2 percent rise from the previous quarter, according to data from the Bangko Sentral ng Pilipinas (BSP).

Despite the uptick, the external debt ratio—expressed as a percentage of gross domestic product (GDP)—remained stable at 28.9 percent, a slight improvement from 29.0 percent in the previous quarter.

BSP officials maintained that the country’s external debt remains manageable, with key indicators pointing to sustainable levels.

Gross international reserves (GIR), which stood at $105.19 billion by the end of June, provided significant cover for short-term debt, equivalent to 3.84 times the short-term debt based on remaining maturity. This serves as a buffer for the country’s foreign obligations.

 

Debt Service Ratio Improves

The country’s debt service ratio (DSR)—which measures the burden of principal and interest payments on the economy—showed a marked improvement, falling to 9.5 percent from 11.1 percent in the same period last year.

The lower debt service payments in the first half of 2024 contributed to this improvement, further easing the country’s ability to meet its external obligations.

Rise in Debt Driven by Government Borrowings

The increase in the debt stock was largely attributed to net availments, amounting to $1.50 billion, by the National Government (NG).

A major portion of this came from the issuance of $2 billion in global bonds under the Sustainable Finance Framework, along with $611.81 million from official creditors.

The government has been actively seeking sustainable financing for infrastructure and social services, which explains the rise in borrowings.

However, the appreciation of the U.S. dollar tempered the debt increase by $736.65 million due to foreign exchange revaluation, as borrowings in other currencies were negatively affected.

Year-on-year, the country’s external debt increased by $12.26 billion, or 10.4 percent, from the $117.92 billion recorded in June 2023.

Private sector borrowings played a significant role in this growth, with banks securing loans for corporate expenses and liquidity needs, contributing $5.83 billion.

Public and Private Sector Debt Profiles

Public sector debt rose by $922.95 million in the second quarter of 2024, reaching $79.83 billion, representing 61.3 percent of the country’s total debt.

The bulk of this, or 91.7 percent, was attributed to the National Government. Despite this increase, the sector benefited from foreign exchange revaluations and net dispositions by non-residents of debt securities, mitigating some of the rise.

Private sector debt, meanwhile, grew to $50.36 billion, with its share to total debt at 38.7 percent.

Prior period adjustments and corporate debt securities purchases by non-residents contributed to this increase, though net repayments and foreign exchange factors provided some balance.

 

Debt Composition and Major Creditors

Loans from official sources, including multilateral and bilateral creditors, continued to make up the largest share of the country’s debt at $50.14 billion.

Bond and note issuances accounted for $43.38 billion, while borrowings from foreign banks stood at $29.11 billion.

Japan remained the Philippines’ largest creditor, with $14.25 billion in outstanding loans, followed by the Netherlands and the United Kingdom.

The country’s debt is predominantly denominated in U.S. dollars (77 percent) and Japanese yen (7.7 percent). Smaller portions are held in Philippine pesos, euros, and Special Drawing Rights (SDRs).