Debt rises to $ 106 billion thanks to higher borrowing

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Lawrence Agcaoili – The Filipino Star

December 13, 2021 | 00h00

MANILA, Philippines – Foreign bonds of the Philippines rose 4.7% to $ 105.93 billion at the end of September, from $ 101.2 billion at the end of June as the country received an emergency reserve fund from the Fund monetary policy (IMF), and also because of the higher government borrowing for its pandemic response measures.

BSP Governor Benjamin Diokno said the increase was due to net cash of $ 5.7 billion after the national government raised $ 3 billion through the sale of global dollar-denominated bonds in as part of a double-tranche offer.

Diokno said the government has also borrowed $ 1.3 billion from official sources to fund general financing needs as well as COVID response programs.

The PASB chief stressed that the 2.8 billion dollars received from the IMF on August 23 also increased the reserve assets and the level of the country’s external debt.

According to Diokno, adjustments of $ 573 million from previous periods contributed to the increase in the outstanding debt.

On the other hand, Diokno said that residents’ investments in Philippine debt securities issued abroad worth $ 556 million partly mitigated the increase in the level of debt.

From January to September, the country’s foreign bonds rose 15.2%, compared to $ 91.98 billion in the same period last year.

Diokno said the $ 13.95 billion year-on-year increase in external debt was due to net cash flows of $ 14.3 billion mainly from the national government and private non-bank institutions, as well as adjustments of $ 2.3 billion from previous periods.

The increase was partially offset by the transfer of Philippine debt securities from a non-resident to residents worth $ 1.7 billion and a negative currency revaluation of $ 987 million.

The PASB chief said the country’s outstanding external debt remained at a cautious level, with its gross domestic product (GDP) ratio rising to 27.3 percent at the end of September.

He said the level of gross international reserves (GIR) stood at $ 106.6 billion at the end of September, equivalent to 8.8 times short-term debt coverage.

Data showed that the debt service ratio rose to 8.1% in the first nine months from 7.2% last year due to higher payments, while the total outstanding Debt Debt (DET) expressed as a percentage of gross domestic product (GDP) remains one of the lowest compared to other Southeast Asian countries.

The external debt of the public sector increased by 8.8% to 65.2 billion dollars at the end of September against 59.9 billion dollars at the end of June, representing 61.5% of the country’s external debt.

The national government accounted for 87.3% or $ 56.9 billion of total public sector debt, while state-owned and controlled companies, government financial institutions and the central bank monopolized the 12.7% remaining or $ 8.4 billion.

At the same time, the external commitments of private companies amounted to 40.7 billion dollars at the end of September for a share of 38.5%.

According to the BSP, the main creditor countries are Japan with $ 14.8 billion, followed by the United States with $ 2.9 billion, the Netherlands with $ 2.8 billion, the United Kingdom with 2 , $ 4 billion and China with $ 2.2 billion.

Loans in the form of bonds or notes accounted for the largest share at 37.7%, followed by borrowings from multilateral credit institutions and bilateral creditors (37.3%) and obligations to foreign banks and others. financial institutions (19.2%). The remaining 5.7% was owed to other creditors such as suppliers and exporters.

In terms of the currency mix, the country’s debt stock remained largely denominated in dollars with 54.9% and in Japanese yen with 10.1%. World Bank and Asian Development Bank dollar-denominated multi-currency loans accounted for 19.4 percent.

The data showed that the country’s external debt maturity profile remained mostly medium to long term in nature with initial maturities greater than one year with a total share of 88.3%, while short term accounts with maturities of up to one year included the 11.7% balance.

“This means that the foreign exchange requirements for debt payments are well distributed and, therefore, manageable,” Diokno said.

The national government borrows heavily from foreign and domestic creditors to finance the country’s budget deficit because it spends more than it actually earns. The country’s budget deficit has skyrocketed as the pandemic-induced recession squeezed revenue, while spending skyrocketed to fund pandemic response measures.


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