Philippine external debt ratio lowest among ASEAN peers

Gil S. Beltran

THE Philippines’ external debt relative to gross national income (GNI) is the lowest among its peer economies in the Association of Southeast Asian Nations, known as the ASEAN-5, according to the Department of Finance (DoF).

Citing data from the World Bank, the DoF in an economic bulletin said the gross foreign debt stock was 20.11% of GNI in 2019, from 19.98% in 2018.

Thailand’s ratio was 34.07% in 2019, followed by Indonesia with 36.85% and Malaysia with 64.59%. Data for Vietnam was not available but the DoF said Vietnam’s external debt was at 31.06% of GNI in 2018.

In a text message Sunday, Finance Undersecretary Gil S. Beltran, the department’s chief economist, said the ratio measures the debt burden carried by each country, reflecting its ability to pay back creditors and how much room they have to take on more debt.

“In the face of a slowing global economy and dampening of investment activities resulting from the COVID-19 pandemic, countries scramble for funds to fuel economic recovery. This is where countries’ overall debt scenario is crucial,” he said in the bulletin.

“While uncertainties abound, debt metrics are among the important indicators being watched by both domestic and international investors, along with credit rating agencies,” he added.

As a percentage of exports of goods and services and primary income, the foreign debt ratio fell to 54.4% in the first quarter from 54.8% a year earlier.

After the 1997 Asian financial crisis, the equivalent ratio was 106.1% in 2000.

“The relatively low external debt-to-GNI ratios attests to the government’s policy of sustaining its prudent borrowing activities,” according to the bulletin.

The central bank estimates that outstanding foreign debt rose 7.4% quarter on quarter to $87.45 billion at the end of June after the government increased its borrowing to fund pandemic containment measures. The debt was also up 4.6% from the start of the year.

“While the realities brought about by the health crisis have significantly changed the global economic and financial landscape, the government is steadfast in pursuing various reforms to raise much needed revenue to stimulate the economy and at the same time enhance the fiscal space,” the DoF said.

The government plans to borrow P3 trillion this year from domestic and foreign sources to plug the funding gap, which is expected to hit 9.6% of gross domestic product. It plans to raise 74% of the total from domestic lenders to minimize exposure to foreign exchange volatility. — Beatrice M. Laforga

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