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Managing Philippine External Debt: Policies and Mechanisms

Learn about Philippine external debt policies, approval systems, and recent developments, including regulatory mechanisms and debt restructuring. Explore debt statistics and indicators to understand the country's debt management strategies.

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Managing Philippine External Debt: Policies and Mechanisms

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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

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