Mid-year Economic Briefing

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

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RECENT DEVELOPMENTS
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Total external debt remains manageable
2001 2002 2003 2004
Total Debt (US billion) 51.90 53.65 57.40 54.85
Growth () 1.35 3.37 6.99 -4.44

• 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
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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.

2002 2003 2004
Total 16.5 17.2 17.4
Public 19.1 19.4 19.6
Private 10.5 11.0 10.9
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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
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External Debt By Borrower
Percent Share to Total () 2001 2002 2003 2004
Public 64.35 66.24 68.82 69.10
of w/c NG 38.55 41.71 45.49 46.85
Private 35.65 33.76 31.18 30.90

• Public sector accounts for bulk of total external
  debt.

in US billion
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External Debt By Borrower and Creditor (as of
end-December 2004)
Levels (in US million) Levels (in US million) Levels (in US million) Levels (in US million) Percent share to total () Percent share to total () Percent share to total ()
Total Public Sector Of w/c NG Private Sector Total Public Sector Private Sector
Total 54,846 37,895 25,693 16,951 100.0 69.1 30.9
Multilateral 8,440 7,939 4,790 501 15.4 14.5 0.9
Bilateral 16,800 13,900 9,935 2,901 30.6 25.3 5.3
Banks Fis 11,175 3,627 940 7,548 20.4 6.6 13.8
Suppliers/ Exporters 2,041 47 9 1,993 3.7 0.1 3.6
Bondholders/ Noteholders 15,839 12,374 10,019 3,465 28.9 22.6 6.3
Others 551 8 - 543 1.0 0.0 1.0
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External Debt by Currency
In US billion 2001 2002 2003 2004
US dollar 29.6 29.2 30.9 28.1
Japanese yen 12.7 14.5 15.9 16.4
Euro 1.0 2.0 2.7 3.2
Others 8.6 8.0 7.9 7.1

• On average, more than half of the countrys
  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
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External Debt by Creditor Country
In US billion 2001 2002 2003 2004
Japan 12.0 12.9 14.5 14.5
US 6.0 6.3 6.2 3.9
Germany 3.5 3.2 2.7 2.7
France 0.7 0.9 0.9 1.4
Others 1/ 29.7 30.4 33.1 32.3

• Japan and the US are the countrys major creditors

1/ Includes multilateral agencies and
bondholders/noteholders
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Selected Philippine External Debt Ratios
In Percent () 2001 2002 2003 2004
External debt to GNP 68.27 65.55 67.36 59.15
External debt to GDP 72.88 69.91 72.35 63.46
DSB to exports of goods, receipts from services Income 15.80 16.41 16.93 a/ 13.82
DSB to GNP 8.63 9.10 9.35 7.79
DSB to GDP 9.22 9.70 10.04 8.35
GIR to Short-term Debt (Residual) 1.44 1.44 1.41 1.57
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
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Philippines External Debt to GDP
In percent
gt 70.0
63.9
63.5


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Philippines Debt Service Burden to External
Revenue
In percent
27.2
gt25.0
13.8
16
Philippines GIR to ST debt (remaining maturity)
In percent
156.5
gt 100.0
48.0
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EXTERNAL DEBT INDICATORS OF SELECTED COUNTRIES
2004 (in percent)
ST/EDT PED/EDT EDT/GNI GIR/ST
Philippines 9.2 69.1 59.2 321.6
Indonesia 5.6 60.2 (2003) 77.3 (2003) 463.6
Malaysia 28.0 51.9 (2003) 51.0 (2003) 419.2
Thailand 22.4 32.8 (2003) 38.1 (2003) 435.8
Argentina 38.6 67.6 (2003) 104.9 (2003) 30.9
Brazil 10.8 40.2 (2003) 49.3 (2003) 223.3
Chile 17.6 22.6 51.7 (2003) 207.8
Mexico 13.9 60.7 22.2 (2003) 355.1
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
SourcesNational Websites
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Impact of an increase in global interest rate
A 1 percentage point increase in global interest
rate would result in
in US million Short-term Medium- long-term Total
Increase in total debt service 50 175 225
Increase in public sector debt service 10 105 115
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