The Philippines saw a significant uptick in its external debt with latest data from the central bank showing a 10.12 percent increase as of end-September to hit $118.833 billion or $10.923 billion higher compared to same period last year of $107.91 billion. 

Data from the Bangko Sentral ng Pilipinas (BSP) showed that on a quarterly basis, the external debt rose by 0.8 percent or $915 million from $117.9 billion reported end-June this year.

Gross external debt, as defined by the BSP, is the outstanding amount of actual current, and not contingent, liabilities that require payment of interest and principal by the debtor at some point in the future. It is owed to non-residents by residents of an economy and are typically borrowings from multilateral and bilateral creditors.

“Despite the increase in the debt stock, the external debt ratio (expressed as a percentage of gross domestic product) improved to 28.1 percent from the previous quarter’s 28.5 percent owing to the economy's growth during the third quarter,” said the BSP.

Still on a quarterly basis, the debt level increased due to prior periods’ adjustments of $2 billion, of which $1.9 billion were borrowings from the private sector non-banks. These were borrowings made in previous quarters.

The BSP said the quarter-on-quarter increase was offset by the following: negative foreign exchange (FX) revaluation of $655 million; the sale of Philippine debt papers to residents by non-residents of $220 million; and net repayments of $200 million.

Meanwhile, the year-on-year increase in the debt stock of 10.12 percent was due to the following: total net availments of $6 billion, bulk of which were borrowings by the National Government; the change in the scope of the external debt to include non-residents’ holdings of peso-denominated debt securities issued onshore reported in the first quarter of 2023 worth $3.3 billion;  prior periods’ adjustments of $1.5 billion; and positive FX revaluation of $291 million.

“The sale of Philippine debt papers issued offshore by non-residents to residents of US$224 million had a minimal offsetting effect on the year-on-year increase of the debt stock,” said the BSP.

As of end-September, the debt service ratio (DSR) increased to 10.3 percent from 4.8 percent same time last year due to higher recorded principal and interest payments in 2023.

The DSR and the country’s gross international reserves cover for short-term debt and measures the “adequacy of the country’s (FX) resources to meet maturing obligations.” The DSR relates principal and interest payments -- or the debt service burden -- to exports of goods and receipts from services and primary income.

The BSP said the external debt’s maturity profile is still predominantly medium- and long-term (MLT). These are debts with original maturities longer than one  year. MLT accounts comprised 85.6 percent or $101.7 billion of total external debt.

As for the weighted average maturity for all MLT accounts, this decreased to 17.2 years from 17.3 years, with public sector borrowings having longer average tenor of 20.3 years versus 7.2 years for the private sector, said the BSP. Short term liabilities or debts with original maturities of up to one year, accounted for 14.4 percent of the outstanding debt stock and comprised mainly of bank liabilities, trade credits, and other liabilities.

“Of the MLT accounts, 54.6 percent (US$55.5 billion) have fixed interest rates, 43.5 percent (US$44.3 billion) carry variable rates, and 1.8 percent (US$1.9 billion) are non-interest bearing,” said the BSP.

As of end-September, public sector external debt declined to $73.7 billion from $74.5 billion in the second quarter. Its share to total likewise dropped to 62 percent from 63.2 percent a quarter ago.

About $67.2 billion or 91.1 percent of public sector obligations were NG borrowings, while the remaining $6.5 billion were borrowings of government-owned and controlled corporations, government financial institutions and the BSP.

In the same period, private sector debt increased to $45.1 billion from $43.4 billion in the previous quarter. Its share to total rose 38 percent versus 36.8 percent end-June.

The BSP explained that private sector debt increased due to the following: prior periods’ adjustments of $1.9 billion arising from the late registration application/reporting of borrowings by various private sector borrowers; and the sale of debt securities by residents to non-residents of $231 million.

There were also net repayments of $305 million and negative FX revaluation of $102 million which was “partially tempered the rise in the private sector debt level.”

The BSP said Japan continued to be the country’s major creditor with $14.8 billion debt, followed by the United Kingdom with $4.1 billion, and Singapore with $3.3 billion.

Other loans worth $32.1 billion came from official sources or multilateral sources such as the Asian Development Bank and the World Bank. The country also owed $13.4 billion from bilateral creditors. Combined, loans from multilateral and bilateral creditors total $45.5 billion which was about 38.3 percent of the total debt stock.

The Philippines also has borrowings in the form of bonds/notes worth $38.8 billion or 32.7 percent of the total, as well as borrowings from foreign banks and other financial institutions worth $26.7 billion or 22.5 percent of the total. Another 6.6 percent or $7.8 billion were owed to other creditors, mainly suppliers/exporters, said the BSP.