By DES FERRIOLS

The strength of the peso allowed the public and the private sectors to prepay nearly $3 billion worth of foreign debt in 2007, the Bangko Sentral ng Pilipinas (BSP) said Monday.

Full-year data from the BSP reported that total prepayments in 2007 reached $2.995 billion, the highest prepayment level since the Asian financial crisis.

BSP Governor Amando M. Tetangco Jr. said the full-year prepayment data showed that the public sector paid a total of $1.12 billion while private corporations with foreign obligations prepaid a total of $1.875 billion.

According to Tetangco, the private sector continued to prepay some of its foreign obligations when corporations pared off an additional $245 million in December alone.

The prepayments made by the public sector, on the other hand, remained at the end-November level of $1.12 billion of which the National Government accounted for $126 million.

The BSP, according to Tetangco, had also prepaid all foreign debts it could prepay as early as the third quarter, accounting for $810 million of the total amount.

The BSP said the prepayment of the country’s foreign debts in 2007 has reduced its external debt ratios to sustainable levels.

The proportion of the country’s external debt to gross domestic product (GDP) had declined from a high of 54.9 percent in 2005 to only 40.4 percent at the end of the third quarter in 2007.

"The decrease in the debt ratios show that debt levels are becoming more sustainable," said BSP Deputy Governor Diwa Guinigundo.

"This in turn helps reduce the economy’s vulnerability to external shocks, he added."

According to Guinigundo, the country’s external debt ratio was also one of the critical factors in the recent upgrading of the country’s credit ratings outlook.

In turn, Guinigundo said the upgrade in the country’s credit rating would lower the borrowing costs for both the government and private corporations.

This year, prepayments are expected to surge even faster as the peso remained firm against the dollar.

Tetangco has urged both government agencies and private companies to consider more prepayments of their foreign debt this year to take advantage of the strength of the peso against the dollar.