Outstanding external debt (EDT) slightly grew in the third quarter of 2022, while the country’s external debt to Gross Domestic Product (GDP) remained at 26.8 percent similar to that of the previous quarter.
The low EDT to GDP ratio, a solvency indicator, indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term. The ratio remains one of the lowest when compared to other ASEAN member countries.
Other key external debt indicators also remained at prudent levels. Gross international reserves stood at US$93.0 billion as of end-September 2022 and represented 5.7 times cover for short-term (ST) debt based on the original maturity concept.
The debt service ratio (DSR) dropped to 5.4 percent from 8.2 percent recorded for the same period last year due to lower repayments accompanied by higher receipts.
The DSR, which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange (FX) earnings to meet maturing obligations.
External Debt
External debt, which refers to all types of borrowings by Philippine residents from non-residents (following the residency criterion for international statistics), stood at US$107.9 billion as of end-September 2022, up by US$218 million (or 0.2 percent) from the US$107.7 billion level as of end-June 2022.
The increase in the debt level during the third quarter of 2022 was due to
net availments of US$3.1 billion, partly offset by: (a) US$1.2 billion negative FX revaluation; (b) US$893 million transfer of Philippine debt papers issued offshore (from non-residents to residents); and (c) US$778 million negative prior periods’ adjustments.
The bulk of the recorded availments during the quarter were from the increase in the reported ST liabilities of banks as it sought the offshore market to meet its funding requirement for relending, investments, and other FX transactions.
Meanwhile, the strengthening of the US Dollar against other currencies brought down the US Dollar equivalent of borrowings denominated in other currencies, providing an offsetting effect on the external debt levels.
Year-on-year, the country’s debt stock rose by US$2.0 billion. The increase was driven by net availments of US$9.9 billion, largely by the National Government (NG, US$5.5 billion) and prior periods’ adjustments of US$1.5 billion.
Meanwhile, the transfer of Philippine debt papers from non-residents to residents of US$4.9 billion as well as the negative FX revaluation of US$4.5 billion partially tempered the increase in the debt stock for said period.
Debt Profile
As of end-September 2022, the maturity profile of the country’s external debt remained predominantly medium- and long-term (MLT) in nature [i.e., those with original maturities longer than one (1) year], with share to total at 84.8 percent.
On the other hand, ST accounts [or those with original maturities of up to one (1) year] comprised the 15.2 percent balance of debt stock and consisted of bank liabilities, trade credits and others.
The weighted average maturity for all MLT accounts remained at 16.9 years as compared to previous quarter, with public sector borrowings having a longer average term of 20.5 years compared to 6.8 years for the private sector. This means that FX requirements for debt payments are still well spread out and, thus, manageable.
Public sector external declined to US$64.8 billion (or by US$928 million) as of end-September 2022 from US$65.7 billion as of end-June 2022, with share to total likewise decreasing to 60.0 percent from 61.0 percent.
About US$56.8 billion (87.7 percent) of public sector obligations were NG borrowings while the remaining US$8.0 billion pertained to debt of government-owned and controlled corporations, government financial institutions and the BSP.
On the other hand, private sector debt grew from US$42.0 billion as of end-June 2022 to US$43.1 billion as of end-September 2022, with share to total increasing from 39.0 percent to 40.0 percent.
The rise in private sector debt was mainly due to an increase in the ST liabilities reported by banks, which offset prior periods’ adjustments of negative US$1.0 billion, transfer of Philippine debt papers from non-residents to residents of US$240 million and negative FX revaluation of US$128 million.
Major creditor countries were Japan (US$13.1 billion), United Kingdom (US$3.3 billion), and the United States of America (US$3.1 billion). Creditor mix continues to be well-diversified.
Loans from official sources (multilateral and bilateral creditors) had the largest share (37.7 percent) of total outstanding debt, followed by borrowings in the form of bonds/notes (33.1 percent) and obligations to foreign banks and other financial institutions (22.5 percent); the rest (6.7 percent) were owed to other creditors (mainly suppliers/exporters).
In terms of currency mix, the country’s debt stock remained largely denominated in US Dollar (57.6 percent) and Japanese Yen (8.3 percent) while the 34.1 percent balance pertained to 15 other currencies, including the Euro, Philippine Peso and Special Drawing Rights.
