PH External Debt Remains at Prudent Levelsin the Fourth Quarter of 2023

Total external debt (EDT) stood at US$125.4 billion as of end-December 2023, up by US$6.6 billion (or 5.5 percent) from the US$118.8 billion level as of end-September 2023. 

Despite the increase in the debt stock, the external debt ratio (EDT expressed as a percentage of gross domestic product) remains at prudent levels, recording at 28.7 percent in the last quarter of 2023 from 28.1 percent in the third quarter of 2023 and 27.5 percent in end-2022.

Other key external debt indicators also remained at manageable levels. Gross international reserves (GIR) stood at US$103.8 billion as of end-2023 and represented 6.1 times cover for short-term (ST) debt based on the original maturity concept. The debt service ratio (DSR), which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, increased to 10.2 percent from 6.3 percent for the same period last year due to higher recorded principal and interest payments brought about by rising interest rates in 2023. The DSR and the GIR cover for ST debt are measures of the adequacy of the country’s foreign exchange (FX) resources to meet maturing obligations.

External Debt

The rise in the debt level was due largely to net availments of US$4.9 billion by both private and public sector borrowers. Private sector borrowings for the quarter were mainly driven by the US$3.0 billion availment by a non-bank firm under a syndicated loan from offshore banks. Proceeds from said borrowings were used to finance its capital expenditures and maturing obligations. Public sector borrowers, on the other hand, tapped official creditors and the Islamic finance market through the maiden issuance of the National Government’s (NG) US$1.0 billion 5.5-year dollar-denominated Sukuk bond to fund general financing requirements, infrastructure projects, and social welfare programs.

The positive FX revaluation of borrowings denominated in other currencies as well as the net acquisition of Philippine debt securities by non-residents from residents further increased the debt stock by US$960 million and US$816 million, respectively. The rise in the external debt stock was partially tempered by prior periods’ adjustments of US$98 million.

Year-on-year, the country’s debt stock rose by US$14.1 billion (or by 12.7 percent) from the end-2022 level of US$111.3 billion. The increase was driven by: (a) net availments of US$9.2 billion, bulk of which were net borrowings by the NG (US$7.9 billion); (b) the change in the scope of the external debt to include non-residents’ holdings of Philippine debt securities issued onshore reported in the first quarter of 2023 (US$4.4 billion); and (c) prior years’ adjustments of US$1.2 billion.

Debt Profile

As of end-2023, the maturity profile of the country’s external debt remained predominantly medium- and long-term (MLT) in nature [i.e., those with original maturities longer than one (1) year], with its share to total at 86.4 percent (or US$108.3 billion). Relative to previous quarter, the weighted average maturity for all MLT accounts declined to 16.7 years from 17.2 years, with public sector borrowings having longer average tenor of 19.6 years versus 7.7 years for the private sector. On the other hand, ST liabilities [or those with original maturities of up to one (1) year] accounted for 13.6 percent (or US$17.1 billion) of the outstanding debt stock and comprised mainly of bank liabilities, trade credits, and other liabilities.

Of the MLT accounts, 54.9 percent (or US$59.4 billion) have fixed interest rates, 43.4 percent (or US$47.0 billion) carry variable rates, and 1.7 percent (or US$1.8 billion) are non-interest bearing.

Public sector external debt increased to US$77.8 billion (or by US$4.1 billion or 5.6 percent) in the fourth quarter of 2023 from the previous quarter’s US$73.7 billion level. Correspondingly, its share to total slightly increased to 62.1 percent from 62.0 percent a quarter ago. The growth in public sector borrowings was driven mainly by the US$2.1 billion net availments by NG, followed by the net acquisition of public sector debt securities by non-residents from residents (US$930 million) and positive FX revaluation (US$898 million). About US$71.0 billion (or 91.2 percent) of public sector obligations were NG borrowings, while the remaining US$6.8 billion (or 8.8 percent) pertained to borrowings of government-owned and controlled corporations, government financial institutions and the BSP.

Private sector debt rose to US$47.6 billion as of end-December 2023, a US$2.4 billion (or 5.4 percent) increase from the US$45.1 billion level last quarter, despite its share to total slightly decreasing to 37.9 percent from 38.0 percent. Bulk of the recorded availments were from the increase in the reported ST liabilities of local banks (US$1.1 billion) as well as borrowings by private sector non-bank entities to meet funding requirements (US$1.0 billion). The rise in the private sector debt stock was partly tempered by the: (a) sale of Philippine debt securities by non-residents to residents of US$114 million; and (b) prior periods’ adjustments of US$101 million.

Major creditor countries were: Japan (US$15.6 billion), China (US$4.7 billion), and the United Kingdom (US$4.2 billion).

Loans from official sources [multilateral (US$33.1 billion) and bilateral creditors (US$15.2 billion)] had the largest share (US$48.3 billion or 38.5 percent) of the total outstanding debt, followed by borrowings in the form of bonds/notes (US$40.9 billion or 32.7 percent) and obligations to foreign banks and other financial institutions (US$28.7 billion or 22.9 percent); the rest (US$7.5 billion or 6.0 percent) were owed to other creditors (mainly suppliers/exporters).

In terms of currency mix, the country’s debt stock remained largely denominated in US dollar (US$94.5 billion or 75.3 percent of total) and Japanese yen (US$11.3 billion or 9.0 percent of total). The rest (US$19.6 billion or 15.6 percent) pertained to 18 other currencies, including the Philippine peso (6.9 percent), the Euro (4.7 percent), and Special Drawing Rights (3.1 percent).

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