PH decline in external debt in the second quarter of 2022

The Bangko Sentral ng Pilipinas (BSP) announced Friday that its outstanding external debt (EDT) declined in the second quarter of 2022 to $107.7 billion at the end of June, down $2.1 billion (or 1.9 percent) from $109.8. 1 billion levels as of the end of March.

The decline in the debt level during the second quarter was mainly due to negative foreign exchange (FX) revaluation of $2.0 billion as the US dollar strengthened against other currencies amid the Ukraine-Russia conflict and the recent policy actions of the US Federal Reserve to raise interest rates. To reduce inflation.

The transfer of Philippine debt securities issued abroad (from non-residents to residents) of $613 million and a net repayment of $86 million also contributed to the decrease in the debt level as well.

The country also recorded a decrease in the external debt-to-GDP ratio of 26.8% in the second quarter of 2022, down from 27.5% in the first quarter of the same year.

The ratio remains one of the lowest compared to other ASEAN member countries, with the low EDT-to-GDP ratio indicating the country’s strong position in servicing foreign borrowing in the medium to long term.

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Gross international reserves (GIR) amounted to $100.9 billion at the end of June 2022 and represent 7.3 times short-term (ST) debt coverage based on the original maturity concept.

The debt service ratio also decreased to 5.0 percent from 9.5 percent recorded in the same period last year due to a decrease in payments accompanied by an increase in receipts.

However, the country’s external debt stock rose by $6.5 billion year-on-year, driven by $12.5 billion net availability, largely by the national government ($8.5 billion) and prior period adjustments of $2.8 billion which was then offset by transferring Philippines non-resident debt securities to residents of $5.0 billion plus negative foreign currency revaluation of $3.8 billion.

As of the second quarter of 2022, the maturity profile of the country’s external debt remained mostly medium and long-term (MLT) in nature, with the total share standing at 87.1%.

On the other hand, ST accounts consist of 12.9 per cent of the debit balance and consist of bank liabilities, trade credits, etc.

The weighted average maturity of all MLT accounts remained at 16.9 years compared to the previous quarter, with the average term for public sector loans at 20.4 years compared to 7.1 years for the private sector. This means that the foreign currency requirements for debt repayment are still well spread out, and therefore manageable.

The external debt of the public sector decreased to $65.7 billion at the end of June 2022 from $67.4 billion at the end of March 2022, while the private sector debt also decreased from $42.4 billion in the first quarter of 2022 to $42.0 billion in the second quarter of 2022.

The main creditor countries were Japan ($13.8 billion), the United Kingdom ($3.6 billion) and the Netherlands ($2.8 billion) where the mix of creditors remains well diversified.

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