Outstanding external debt hits $130.18B at end-June

OUTSTANDING external debt hit a record $130.182 billion at the end of June, but remained at “manageable” levels, the Bangko Sentral ng Pilipinas (BSP) said.

Preliminary data from the BSP showed external debt rose by 10.4% from the $117.918 billion seen as of June 2023.

External debt includes all types of borrowings by residents from nonresidents.

“The increase was mainly driven by net availments of $10.36 billion, of which $5.83 billion were borrowings by private sector entities (largely by banks for general corporate expenditures and liquidity purposes),” the BSP said.

The annual increase in the country’s debt stock was also driven by the net acquisition of Philippine debt securities by nonresidents of $2.04 billion and prior years’ adjustments of $1.22 billion.

“The negative foreign exchange (FX) revaluation of borrowings denominated in other currencies amounting to $1.36 billion tempered the rise in the debt level over the 12-month period,” the BSP said.

Despite the rise in debt stock, the BSP said external debt as a percentage of gross domestic product remained at a “prudent” level. The external debt-to-GDP ratio stood at 28.9% at end-June, slightly improving from the 29% at end-March.

The BSP said other key external debt indicators were still at “comfortable levels.”

As of end-June, gross international reserves (GIR) stood at $105.19 billion and represented 3.84 times cover for short-term (ST) debt based on the remaining maturity concept.

“The debt service ratio (DSR), which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, improved to 9.5% from 11.1% for the same period last year due to lower debt service payments in the first half of 2024,” the BSP said.

The DSR and the GIR cover for ST debt is a gauge of the adequacy of foreign exchange earnings to meet maturing debt obligations.

In May, the government raised $2 billion (P114.7 billion) from its first global bond sale this year.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message also said that the wider budget deficit in recent months led to more government borrowings, including external borrowings.

Quarter on quarter, the country’s external debt stock rose by 1.2% as of end-June from $128.69 billion as of end-March 2024.

“The rise in the debt level was primarily driven by net availments aggregating $1.5 billion as the National Government (NG) raised $2.61 billion from: (a) the issuance of its $2-billion Dual Tranche Fixed Rate Global Bonds under its Sustainable Finance Framework; and (b) $611.81 million borrowings from official creditors,” the BSP said.

“Prior periods’ adjustments of $493.28 million due to late reporting/registration by borrowers as well as net acquisitions of Philippine debt securities by nonresidents from residents aggregating $238.8 million also contributed to the rise in the debt level,” it added.

The BSP noted that the quarter-on-quarter rise in debt stock was dampened by the negative $736.65-million foreign exchange revaluation of borrowings denominated in other currencies brought about by the dollar’s appreciation.

Meanwhile, BSP data showed that private sector’s external debt rose by 1.1% quarter on quarter to $50.36 billion, mainly due to the prior periods’ adjustments of $522.86 million and the net acquisition by nonresidents from residents of corporate debt securities amounting to $398.39 million.

Meanwhile, public sector debt went up by 1.2% quarter on quarter to $79.83 billion in the period ending June.

“The increase in public sector borrowings was driven mainly by total net availments of $1.75 billion as the NG tapped international capital markets and various official creditors to increase funding for its infrastructure projects and social services programs,” the BSP said.

The bulk, or 91.7% of public sector obligations were from government borrowings, while the rest came from borrowings of government-owned and -controlled corporations, government financial institutions, and the BSP.

As of end-June, the Philippines’ top creditor countries were Japan ($14.25 billion), the Netherlands ($4.31 billion), and the United Kingdom ($4.17 billion).

Mr. Ricafort said that external debt could increase in the coming months due to the latest dollar bond issuance by the government. — AMCS