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OUTSTANDING EXTERNAL DEBT in the hands of the Philippines last year it reached its highest level since at least 2012, as the government incurred massive loans for its response to the pandemic.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) released on Saturday showed that external debt stood at $ 98.488 billion at the end of 2020, 17.8% more than the $ 83.618 billion at the end of 2019, and 7.1% more than the $ 92 billion at the end of 2020. the end of September.
This is also the highest since at least 2012, according to data available from the central bank.
The level of external debt at the end of 2020 is equivalent to 27.2% of the country’s gross domestic product (GDP), going from 25.3% at the end of September and from the 22.2% observed in 2019.
“The external debt-to-GDP ratio remains relatively lower compared to countries with similar ratings globally,” Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said in a text message.
Meanwhile, the debt service ratio (DSR), which relates principal and interest payments to exports of goods and income from services and primary income, rose to 6.3% in 2020 from 6.7 % in 2019. The DSR is an indicator of the adequacy of the country’s foreign exchange earnings in relation to meeting its debt obligations at maturity.
The central bank in a statement said the increase in external debt was attributed to increased loans to finance the pandemic response and government infrastructure projects.
“The exchange rate appreciation of $ 544 million further contributed to the increase in the debt stock as the dollar weakened against other currencies, which can be attributed to expectations of continued stimulus in the United States, among others ”, added the BSP.
External debt includes all types of loans from residents to non-residents.
In the period from October to December, loans from both the public and private sectors reached $ 7.9 billion. In addition, the government raised $ 2.8 billion from global bonds and $ 733 million from net profits from official sources.
With this, the external debt of the public sector reached $ 58.1 billion at the end of December compared to $ 54.4 billion in the previous quarter. Most or about $ 51.9 billion were loans from the National Government, while $ 6.3 billion were debt guaranteed by government owned and controlled corporations, government financial institutions and the BSP.
Meanwhile, private sector debt rose to $ 40.4 billion from $ 37.6 billion at the end of September, driven by loans worth $ 3 billion and $ 1.7 billion from banks and quasi-lenders, respectively, in the fourth trimester.
The BSP identified Japan ($ 15.9 billion), the United States ($ 3.4 billion), the United Kingdom ($ 3.3 billion), and the Netherlands ($ 3 billion) as the top creditor countries.
For Ricafort, a greater reopening of the economy once the pandemic is better contained will be useful for the external debt profile. This could translate into higher tax collection and limit the increase in the country’s foreign and local debt stock, he added.
“The National Government recently pointed out to increase the ratio between local loans and external loans, which could help reduce exchange risks,” said Ricafort.
Government officials are considering a funding mix of 85:15 this year, in favor of domestic loans, up from the 75:25 ratio before the pandemic. – Luz Wendy T. Noble
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