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External debt hits $118 billion

External debt hits $118 billion

THE PHILIPPINES’ outstanding external debt reached $117.918 billion at end-June as the government diversified its borrowings from other countries and institutions.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Friday night showed external debt increased by 9.5% to $117.918 billion at end-June from $107.692 billion in the same period a year ago.   

However, it dipped by 0.8% from the record $118.812 billion seen at the end of March.

The BSP in a statement said the annual growth of the external debt stock was driven by net availments of the National Government (NG) worth $7.9 billion.   

It was also due to the change in the scope of the external debt, which now includes nonresidents’ peso-denominated debt securities issued onshore and other prior adjustments.   

“Meanwhile, the transfer of Philippine debt papers issued offshore from nonresidents to residents of $1.3 billion and negative FX (foreign exchange) revaluation of $295 million partially tempered the year-on-year increase in the debt stock,” the BSP said.   

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

“The increase in external/foreign debt was due to some diversification of the country’s borrowing sources other than domestic borrowings, but realistically entail greater FX risks,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Higher external debt also ensuring that the foreign commercial borrowing/bond issuance shelves are continuously available and liquid in terms of market trades for foreign investors.”

Mr. Ricafort noted the annual growth in external borrowings was due to official development assistance (ODA) loans from multilateral sources such as the World Bank, the Asian Development Bank, among others.   

The BSP said the quarter-on-quarter decline in the debt level was “due mainly to the impact of the US dollar appreciation against other currencies amid further monetary policy tightening by the Federal Reserve.”

The peso closed at P55.20 against the dollar on June 30, weakening by 1.5% or 84 centavos from the P54.36 finish on March 31.   

The US Federal Reserve hiked its policy rate to 25 basis points at its meeting in May, bringing the target Fed funds rate to 5-5.25%.   

“The sale of Philippine debt papers by nonresidents to residents also decreased the debt stock by $305 million. These offset prior periods’ adjustments of $264 million and net availments of $110 million,” the central bank said.   

This brought the external debt ratio, or the external debt as a percentage of gross domestic product (GDP) to 28.5%, slightly lower than the 29% seen in the previous quarter.   

“Nevertheless, the country’s external debt-to-GDP ratio is still among the lowest compared to other Asian countries, thereby giving the country greater leeway to increase foreign borrowings,” Mr. Ricafort said.    

BSP data also showed the debt service ratio, or principal and interest payments as a fraction of export receipts and primary income, rose to 11% at the end of June from 4.6% a year earlier.

Borrowings by the public sector inched up by 0.9% to $74.5 billion as of end-June from $75.2 billion in the quarter earlier.

“About $67.7 billion (90.9%) of public sector obligations were NG borrowings, while the remaining $6.8 billion pertained to borrowings of government-owned and -controlled corporations, government financial institutions and the BSP,” the central bank said.

Private sector debt also slipped by 0.5% to $43.4 billion as of end-June from $43.6 billion as of end-March.

The Philippines’ top creditor countries were Japan ($13.3 billion), the United States ($4.1 billion), and the United Kingdom ($3.7 billion) as of end-June.

Loans from multilateral ($32 billion) and bilateral sources ($12.6 billion) accounted for 37.9% of all external borrowings.

Other sources were bonds ($40.7 billion or 34.5%) and foreign banks and other financial institutions ($25 billion or 21.2%), while the rest ($7.5 billion or 6.4%) were owed to suppliers and foreign exporters. — Keisha B. Ta-asan

#External #debt #hits #billion

NG debt hits P14.24 trillion at end-July

NG debt hits P14.24 trillion at end-July

By Luisa Maria Jacinta C. Jocson, Reporter

THE National Government’s (NG) outstanding debt hit a record P14.24 trillion as of end-July due to higher domestic borrowings, the Bureau of the Treasury (BTr) said on Friday.

Preliminary data from the BTr showed outstanding debt inched up by 0.7% from P14.15 trillion at the end of June, “primarily due to the net issuance of domestic securities.”

Year on year, the debt stock rose by 10.5% from P12.89 trillion. It also increased by 6.2% from the P13.42 trillion as of end-December 2022.

Of the total debt portfolio, more than two-thirds or 68.9% came from domestic lenders, while the rest was sourced from foreign creditors.

As of end-July, domestic debt jumped by 11.1% to P9.81 trillion from P8.83 trillion in the same period a year ago

Month on month, domestic debt edged up by 1.1% from P9.7 trillion as of end-June.

At the end of July, domestic borrowings consisted almost entirely of debt securities.

“The increment in the domestic portfolio was attributed to the P110.39 net issuance of government bonds driven by the NG’s financing requirements, offsetting the P0.85 billion effect of local currency appreciation against the US dollar on onshore foreign currency-denominated securities,” the BTr said.

Data from the Treasury showed that the peso appreciated by 0.97% against the US dollar to P54.834 as of end-July from P55.368 as of end-June.

Meanwhile, external debt rose by 9.3% to P4.43 trillion from P4.06 trillion as of end-July 2022.

However, it edged lower by 0.3% from P4.45 trillion in end-June “due to the effect of peso appreciation against the US dollar amounting to P42.87 billion,” the BTr said.

“This more than offset the P9.97 billion net impact of third-currency fluctuations against the US dollar and P19.81 billion net availment of foreign loans,” it added.

Broken down, foreign debt consisted of P2.42 trillion in global bonds and P2.02 trillion in loans.

As of end-July, the NG’s overall guaranteed obligations inched down by 1.7% to P363.39 billion from P369.73 billion as of end-June.

Year on year, guaranteed debt declined by 10.9% from P408 billion in July last year.

“For the month, the decline in guaranteed debt was attributed to the net repayment of both domestic and external guarantees amounting to P5.30 billion and P0.21 billion, respectively,” the BTr said.

“In addition, peso appreciation against the US dollar further trimmed P1.67 billion, offsetting adjustments on third currency-denominated guarantees amounting to P0.84 billion,” it added.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said that the rise in NG’s outstanding debt continues to outpace gross domestic product (GDP) growth.

“The recent disappointing second-quarter GDP growth report underscores the challenges we face alongside the prolonged susceptibility to ratings actions from credit ratings agencies,” he said in a Viber message.

The Philippine economy expanded by a weaker-than-expected 4.3% in the second quarter, lower than the 6.4% in the first quarter and the 7.5% posted in the second quarter last year.

This brought GDP growth to 5.3% in the first half, well below the government’s 6-7% target this year.

“Rising debt could keep the debt-to-GDP ratio above 60%, which leaves the Philippines susceptible to action by ratings agencies,” Mr. Mapa added.

NG debt as a share of GDP stood at 61% at the end of June, lower than the 62.1% from the same period a year ago.

However, the ratio remains above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The government aims to bring the debt-to-GDP ratio below 60% by 2025.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said that elevated inflation bloated government expenditures. Higher interest rates also raised borrowing costs of the government, leading to an increase in debt.

Headline inflation stood at 4.7% in July, above the Bangko Sentral ng Pilipinas’ (BSP) 2% to 4% target for the year. Inflation in the January to July period averaged 6.8%, still above the central bank’s revised 5.6% full-year forecast.

The central bank has hiked benchmark interest rates by 425 basis points (bps) from May 2022 to March 2023 to curb inflation, bringing the key policy rate to a near-16 year high 6.25%

#debt #hits #P14.24 #trillion #endJuly

IMF, World Bank to step up cooperation on climate, debt, digital transition

IMF, World Bank to step up cooperation on climate, debt, digital transition

WASHINGTON – The International Monetary Fund and World Bank on Thursday issued a rare joint statement pledging to step up their cooperation to address climate change, debt vulnerabilities and countries’ digital transitions.

The statement, released ahead of a G20 leaders summit in India this week, said the two institutions can help address mounting challenges facing the global economy – from increasing climate disasters to slowing growth and geopolitical fragmentation – by working together.

“The Bretton Woods institutions, with their universal membership and specialist expertise, are well-placed to make a critical contribution to help countries tackle these challenges,” IMF Managing Director Kristalina Georgieva and World Bank President Ajay Banga said in the joint statement.

The IMF and World Bank were established in 1944 at a meeting in Bretton Woods, New Hampshire.

Mr. Banga is scheduled to attend his first G20 summit after starting as the World Bank‘s new president in June, with a mandate to expand the lender’s resources to help tackle climate change, pandemics, fragility and other global crises alongside its traditional anti-poverty mission.

US President Joe Biden at the G20 summit intends to focus heavily on reforming the World Bank and other multilateral development lenders to scale up their lending for climate and infrastructure. The US sees the institution as an important counterbalance to China’s overseas lending.

The joint IMF–World Bank statement said the two institutions would collaborate on climate change on a “more structured and institutionalized footing.This includes formalizing regular meetings of the new Bank-Fund Climate Advisory Group every two months to consider climate-related developments on key projects, including loans through the IMF‘s new Resilience and Sustainability Trust, which provides middle-income countries with financing on climate resilience and transition projects.

 

DEBT VULNERABILITIES

The two institutions also said they will incorporate climate considerations into their work on debt sustainability for low-income countries.

The IMF and World Bank have worked closely on debt sustainability issues, both pushing for improved restructuring frameworks. They launched a sovereign debt roundtable last year to standardize restructuring concepts and speed up debt treatments.

“We will enhance our joint work to help prevent further build-up of debt vulnerabilities, assisting countries to strengthen debt management and transparency and public finances,” Ms. Georgieva and Mr. Banga said, adding that they would also deepen support to creditors and debtors engaged in debt restructurings.

On the digital transition, the two institutions said they would collaborate to help countries to connect their citizens to online services and reduce barriers to digital inclusion.

“We will step up our joint work to help countries increase the effectiveness of revenue collection and expenditure systems and reap the benefits of new digital technologies while mitigating the risks,” Ms. Georgieva and Mr. Banga said.

That will include improving cross-border payment systems while ensuring that such innovations spur growth, poverty reduction and job creation, they added. – Reuters

#IMF #World #Bank #step #cooperation #climate #debt #digital #transition

PHL external debt service up 160% as of end-May

PHL external debt service up 160% as of end-May

THE PHILIPPINES’ debt service burden on its external debt more than doubled as of end-May amid high global interest rates.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the Philippines’ debt service burden on its external debt increased by 160% to $6.5 billion from $2.5 billion a year ago. 

The debt service burden refers to the amount of money a country needs to pay back to its foreign creditors. It includes both the principal and interest payments on its external debt. 

BSP data showed principal payments climbed by 164.3% to $3.7 billion from $1.4 billion a year ago.

Interest payments jumped by 145% to $2.7 billion in the first five months of the year from $1.1 billion a year earlier.

Principal external debt service is mostly fixed medium- to long-term credits, while interest payments are on fixed and revolving short-term credits of banks and nonbanks.

“Increased bond issuance by the National Government, which is part of the borrowing program, may have pushed up the principal payments to $3.7 billion,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

He said the recent spike in global interest rates is the likely reason behind the 145% increase in interest payments.

Central banks across the world have tightened monetary policy to curb inflation.

“Higher external debt service burden may be attributed to higher prices/inflation that increased government expenditures, increased budget deficits and foreign borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said, adding that the weaker peso could also be a factor.

Headline inflation eased to 6.1% in May from 6.6% in April and brought the five-month average to 7.5%. May also marked the 14th straight month inflation breached the BSP’s 2-4% target.

Based on the latest central bank data, the Philippines’ outstanding external debt rose by 8.25% to $118.8 billion as of end-March from the $109.75-billion level a year earlier.

External debt refers to all types of borrowings by Philippine residents from nonresidents, following the residency criterion for international statistics.

The external debt as of end-March was equivalent to 29% of gross domestic product, higher than 27.5% from end-December and end-March 2022.

The debt service ratio also increased to 12.9% as of end-March from 4% a year ago. — KBT

#PHL #external #debt #service #endMay