The central bank’s decision to raise the external debt ceiling by almost $3 billion this year will not affect the country’s debt sustainability program, an official said.

The Bangko Sentral ng Pilipinas (BSP) increased this year’s external debt limit to $12.7 billion from $10 billion for the public and private sector earlier this month.

A BSP official said there is a possibility that this ceiling will be reached this year. The government recently raised $1.5 billion in global bonds and is expected to raise another $500 million in yen bonds in the next two weeks. The BSP Monetary Board has approved in principle the issuance of up to $1 billion of Samurai bonds.

After the yen bond float, initially pegged at $500 million, the government, government entities and the private sector on the whole can still tap $10.7 billion in foreign debt this year.

“(But) even if the external borrowings of government and the private sector reach this limit, it will still be consistent with our external debt ratios and will not strain our external debt sustainability,” the BSP official said.

The Philippines external debt ratio has been improving since its peak in 2003 but inched up slightly in September 2009, with total external debt reaching $53.1 billion, equivalent to 33.9 percent of GDP.

The external debt to gross domestic product ratio increased to 33.9 percent in September 2009 from 31.9 percent in September 2008.

A significant improvement in the country’s debt ratio stemming from an improvement in government’s revenue collection and sustainable economic growth will help bring about an upgrade in the country’s credit ratings and bring down the cost of government’s foreign borrowings.

As of September 2009, public sector debt has totaled $31.3 billion of which $13.57 billion are in long-term bonds and notes and $17.73 billion are loans.

The private sector, in the meantime, reported external debt of $4.88 billion in the same period. The external debt service ratio or the percentage of total principal and interest payments to total exports of goods and receipts from services and income was estimated at 10.7 percent.