- Published on Saturday, 22 December 2012 18:53
- Written by InterAksyon.com
THE Philippines’s external debt ratios continued to improve in the third quarter, indicating the country’s greater capacity to service its outstanding foreign-currency obligations.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said gross international reserves (GIR) stood at $82 billion at end-September, allowing the country to pay 10.3 times over its short-term debt based on original maturity, or 7.2 times over if based on residual maturity, which includes portions of long-term debt falling due within the next 12 months.
The Phiilippines’s external debt ratio—which is foreign debt as a percentage of gross domestic product (GDP)—fell to 25.6 percent in the third quarter this year from 28.4 percent in the same three-month period last year.
The country’s external debt service ratio—debt payments as a percentage of the country’s exports receipts—likewise dropped to 7.3 percent in the July-to-September period from 8.4 percent last year.
The profile of the Philippines’s foreign debt remains predominantly medium- to long-term at 87.1 percent of the total, thus stretching principal payments into the future. The average maturity of the government share in external debt stood at 22.2 years, while that for the private sector, 10.9 years.
The country’s creditor profile also remains favorable, with multilateral and bilateral lenders accounting for 43 percent of the country’s outstanding foreign debt and bond holders for 36.1 percent. Foreign commercial banks held 14 percent of the country’s debt, while foreign suppliers accounted for the balance of 6.8 percent.
The bigger share of multilateral and bilateral lenders means that this part of the country’s debt carry concessional, or below-market, interest rates.
Forty-eight percent of the Philippines’s external debt is denominated in US dollars, thus the peso’s appreciation has reduced the amount necessary to pay off interest and any maturing principal.
A quarter of the Philippines’s foreign debt is denominated in Japanese yen, while multi-currency loans from the Asian Development Bank and the World Bank comprise 11.8 percent. The balance of 13.8 percent is denominated in 18 other currencies.
The Philippines’s foreign debt stood at $61.7 billion at the end of the third quarter, up 0.8 percent from the second-quarter level but down from $62.4 billion at end-September last year.
International credit-rating firms had increased the country’s rating to a notch below investment grade partly because of the country’s improving external debt ratios. The government has been implementing a liability management program aimed at reducing the country’s vulnerability to foreign currency and interest rate volatility.
On Thursday Standard & Poor’s Ratings Service raised its credit outlook to positive from stable, indicating that a rating upgrade looms next year. This would elevate the Philippines to investment grade, which reduces the country’s cost of borrowing and encourages more foreign investors to enter the country.
Foreign direct investments fuel business creation and expansion, thus helping generate jobs.
(InterAksyon.com)
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