MANILA - Foreign exchange adjustments resulted in the $1.4 billion decline in the Philippines' foreign debts in the first quarter, data from Bangko Sentral ng Pilipinas showed. As of end-March, foreign debts amounted to $52.5 billion from $53.9 billion at end December.

Of the $1.4 billion decrease in debt stock, $1.3 billion was due to a weaker Japanese yen against the U.S. dollar, which is the currency for recording the country's external debts.

The other reason is the $540 million increase in the acquisition of Philippine debt papers issued abroad that are taken up by local investors whose holdings are not included in what are considered external debts.

The net impact of the local investors growing participation in Philippine foreign debt issues, however, was reduced by the state's additional foreign borrowings of $270 million in the same period.

The BSP reported that the external debt portfolio remained predominantly (88 percent) medium- to long-term (MLT). Average year of MLT accounts was estimated at 20 years, with public sector borrowings having longer average tenors of nearly 22 years, compared to 11 years for the private sector.

Short term external debt, which accounted for 12 percent of debt stock, consisted largely of inter-bank borrowings and trade-related obligations.

Total public sector external debt dropped to $39.3 billion, or by $1.0 billion from $40.3 billion in December 2008, mainly as a result of negative foreign exchange revaluation adjustments ($1.2 billion), with yen-denominated debts accounting for the bulk ($960 million).

Private sector external debt similarly declined to $13.2 billion by the first quarter of the year from $13.5 billion in December 2008.

With the decline in both public and private sector borrowings, their share to total remained at the end-2008 levels of 75 percent and 25 percent, respectively.

Prudent levels

BSP Governor Amando M. Tetangco, Jr. said major external debt indicators remained at prudent levels in the first quarter of the year.

• based on original maturity, the ratio of reserves to short-term external debt (with original maturities of one year or less) was at 6:1, and improvement from 5.4:1 in December last year
• based on remaining maturity, ratio to short-term external debt was at 3.4:1
• ratio of total outstanding foreign debt to the Gross National Product (GNP) slightly improved to 28.8 percent in first quarter, from 29 percent in last quarter 2008
• ratio of total outstanding foreign debt to the Gross Domestic Product (GDP) remained stable at 32.3 percent since end-2008. (BSP noted the ratios have been declining since 2002 after they peaked at 99.8 percent in 1986)
• external debt service ratio, which related the total principal and interest payments to income receipts from the exports of goods and services as well as OFW remittances, was estimated at 10.3 percent during the first quarter, slightly higher than the 9.6 percent recorded in December 2008 and 9.8 percent in March 2008.

Domestic borrowings

Total government borrowings surged 130 percent in the first three months of the year as the country's budget deficit more than doubled to P119.7 billion from a year ago due to weak revenues and accelerated expenditures.

Data from the Bureau of Treasury showed the government incurred a total of P351.29 billion in borrowings from January to March, P198.86 billion more than the P152.43 billion in the same period in 2008.

The government taps debts to plug its budget deficit, which reached P119.7 billion as of the first quarter, roughly 60 percent of the P199.2 billion ceiling set for 2009, higher than the P110 billion target for the period, and more than double the P51.6 billion recorded in the first quarter of last year.