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PHILIPPINE EXTERNAL DEBT: An Update

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PHILIPPINE EXTERNAL DEBT: An Update

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  1. PHILIPPINE EXTERNAL DEBT: An Update DIWA C. GUINIGUNDO Assistant Governor Monetary Policy Sub-Sector Bangko Sentral ng Pilipinas 25 April 2005

  2. What is the general policy on foreign borrowings? • BSP Circular No. 1389 (1993) provides that all foreign currency loans shall be regulated by the BSP with the view to manage debt service requirements.* *Pursuant to Philippine Constitution and Foreign Borrowings Act (R.A. 4860)

  3. What loans are covered by the BSP approval system? • All foreign borrowings of the public sector • Private sector loans if: • Guaranteed by government corporations and/or government financial institutions, and covered by foreign exchange guarantees issued by local commercial banks; • Intended for relending to public or private sector enterprise for loans obtained by private commercial banks with maturities of more than 1 year; and • Foreign exchange to service the debt will be purchased from the banking system.

  4. What mechanism does the BSP employ to manage the level of external debt? • Regulatory issues (e.g., circular, circular letters) • Administrative mechanism (approval and registration process, reporting and monitoring system) • Approve debt reduction schemes • Debt refinancing/restructuring

  5. RECENT DEVELOPMENTS

  6. Total external debt remains manageable • As of end-December 2004, total external debt has declined. • On average, short-term debt accounts for only about 10% of total debt. in US$ billion

  7. No bunching of external debt maturities Weighted Average Maturity for Medium- to Long-term Debt (in years) • MLT debt is well spread out based on original maturity. • MLT debt of the public sector even longer.

  8. Interest Rate Profile of MLT/ST Debt (% share to Total External Debt) (as of end-2004) Note: Variable, Fixed and Non-Interest bearing rate profile refer to MLT debt

  9. External Debt By Borrower • Public sector accounts for bulk of total external debt. in US$ billion

  10. External Debt By Borrower and Creditor (as of end-December 2004)

  11. External Debt by Currency • On average, more than half of the country’s external debt is in US dollars • External debt of the public sector is denominated largely in Japanese yen and in US dollars. Debt By Currency (percent share to total)as of end-Dec 2004

  12. External Debt by Creditor Country • Japan and the US are the country’s major creditors 1/ Includes multilateral agencies and bondholders/noteholders

  13. Selected Philippine External Debt Ratios a/ Starting 2003, income includes cash remittances of OFWs which are reflected under the income account and workers’ remittances of current transfers account. Note: Debt Service Burden (DSB) refer to principal and interest payments

  14. Philippines: External Debt to GDP In percent > 70.0 63.9 63.5

  15. Philippines: Debt Service Burden to External Revenue In percent 27.2 >25.0 13.8

  16. Philippines: GIR to ST debt (remaining maturity) In percent 156.5 > 100.0 48.0

  17. EXTERNAL DEBT INDICATORS OF SELECTED COUNTRIES 2004 (in percent) EDT – Total External Debt ST – Short- term debt (Orig. Maturity) PED – Public External Debt GDP – Gross Domestic Product GNI – Gross National Income GIR – Gross International Reserves Sources:National Websites

  18. Impact of an increase in global interest rate A 1 percentage point increase in global interest rate would result in:

  19. Website: www.bsp.gov.phE-mail: bspmail@bsp.gov.ph