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DEBT service fueled by higher interest rates pushed up the country’s external debt in 2023, according to the latest data released by the Bangko Sentral ng Pilipinas (BSP).
BSP said the country’s external debt increased 12.7 percent to $125.4 billion as of end-December 2023 from the $111.27 billion posted in the same period in 2022.
The data also showed an increase of $6.6 billion or 5.5 percent from the $118.8 billion level as of end-September 2023.
“Despite the increase in the debt stock, the external debt ratio [EDT expressed as a percentage of gross domestic product] remains at prudent levels, recording at 28.7 percent in the last quarter of 2023 from 28.1 percent in the third quarter of 2023 and 27.5 percent in end-2022,” BSP pointed out.
BSP said the debt service ratio (DSR) increased to 10.2 percent in December 2023 from 6.3 percent for the same period last year.
The DSR relates to principal and interest payments, termed as the debt service burden, to exports of goods and receipts from services and primary income.
“This was due to higher recorded principal and interest payments brought about by rising interest rates in 2023,” BSP said.
Year-on-year, BSP said, the increase was driven by net availments of $9.2 billion, the bulk of these being net borrowings by the national government at $7.9 billion.
There was also a change in the scope of the external debt to include non-residents’ holdings of Philippine debt securities issued onshore, reported in the first quarter of 2023 at $4.4 billion and prior years’ adjustments of $1.2 billion.
BSP said the rise in the debt level was due largely to net availments of $4.9 billion by both private and public sector borrowers.
Private sector borrowings for the quarter were mainly driven by the $3 billion availment by a non-bank firm under a syndicated loan from offshore banks.
“Proceeds from said borrowings were used to finance its capital expenditures and maturing obligations,” BSP said.
In terms of the public sector, BSP said the government tapped official creditors and the Islamic finance market.
Last year, the national government issued its first issuance of 5.5-year Sukuk bonds worth $1 billion.
The proceeds of the maiden issue were used to finance general financing requirements, infrastructure projects, and social welfare programs.
Meanwhile, public sector external debt increased to $77.8 billion or by $4.1 billion; or 5.6 percent in the fourth quarter of 2023 from the previous quarter’s $73.7-billion level.
Its share to total slightly increased to 62.1 percent from 62 percent a quarter ago. The growth in public sector borrowings was driven mainly by the $2.1-billion net availments by the national government.
This was followed by the net acquisition of public sector debt securities by non-residents from residents (at $930 million) and positive FX revaluation at $898 million.
BSP said about $71 billion or 91.2 percent of public sector obligations were NG borrowings, while the remaining $6.8 billion or 8.8 percent pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP.
Private sector debt increased by 5.4 percent or $2.4 billion to $47.6 billion as of end-December 2023 from the $45.1 billion level in the previous quarter.
The bulk of the recorded availments came from the increase in the reported short-term liabilities of local banks at $1.1 billion, as well as borrowings by private sector non-bank entities to meet funding requirements, at $1 billion.
“The rise in the private sector debt stock was partly tempered by the sale of Philippine debt securities by non-residents to residents of $114 million; and prior periods’ adjustments of $101 million,” BSP said.
Meanwhile, loans were secured mainly from multilateral and bilateral sources, amounting to $48.3 billion or 38.5 percent of the total outstanding debt.
The country’s multilateral debts amounted to $33.1 billion while bilateral loans reached $15.2 billion.
These were followed by borrowings in the form of bonds/notes at $40.9 billion or 32.7 percent of the total, as well as obligations to foreign banks and other financial institutions amounting to $28.7 billion or 22.9 percent; and the rest were owed to other creditors such as suppliers and exporters, $7.5 billion or 6 percent of the total.
“Major creditor countries were: Japan [$15.6 billion], China [$4.7 billion], and the United Kingdom [$4.2 billion],” BSP said.
At the end of 2023, BSP said 86.4 percent or $108.3 billion are composed of medium- and long-term (MLT) loans or those who have maturities of more than 1 year.
BSP said the weighted average maturity for all MLT accounts declined to 16.7 years from 17.2 years, with public sector borrowings having longer average tenor of 19.6 years versus 7.7 years for the private sector.
Of the MLT accounts, 54.9 percent or $59.4 billion have fixed interest rates, 43.4 percent or $47 billion carry variable rates, and 1.7 percent or $1.8 billion are non-interest bearing.
The data showed short-term liabilities or those with original maturities of up to one year accounted for 13.6 percent or $17.1 billion of the outstanding debt stock, and comprised mainly of bank liabilities, trade credits, and other liabilities.
BSP said in terms of currency mix, the country’s debt stock remained largely denominated in US dollars at $94.5 billion or 75.3 percent of total, and Japanese yen at $11.3 billion or 9 percent of total.
The rest or $19.6 billion or 15.6 percent of the total pertained to 18 other currencies. This included the Philippine peso at 6.9 percent of the total; the Euro, 4.7 percent; and Special Drawing Rights, 3.1 percent.
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