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					EXTERNAL DEBT MANAGEMENT
     IN THE PHILIPPINES




          Celia M. Gonzalez
               Director
International Operations Department
     Bangko Sentral ng Pilipinas
             7 July 2004
         Bangkok, Thailand
     EXTERNAL DEBT MANAGEMENT
          IN THE PHILIPPINES

DEBT MANAGEMENT
    FROM A MACRO PERSPECTIVE

   Identification of priority areas for
    foreign financing
   Determination of project viability and
    borrower’s capacity to pay
   Assessment of country’s debt
    servicing capability

       Bangko Sentral ng Pilipinas
     EXTERNAL DEBT MANAGEMENT
          IN THE PHILIPPINES
INSTITUTIONAL ARRANGEMENTS
    FOR DEBT MANAGEMENT
  Bangko Sentral ng Pilipinas
  Department of Finance
  Investment Coordination Committee
  Inter-agency Committee for Review of
   Foreign Loan Documents
  National Economic Development Authority
  Development Budget Coordination
   Committee
  Board of Investments Pilipinas
    Bangko Sentral ng
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES

LEGAL BASES

   The Philippine Constitution – 15 October
    1986
   Letter of Instructions No. 158 – 21 January
    1974
   Foreign Borrowings Act (Republic Act
    4860)
    – 8 September 1966
   New Central Bank Act (Republic Act 7653)
      Bangko Sentral ng Pilipinas
    – 10 June 1993
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES

BSP DEBT MANAGEMENT
  RESPONSIBILITIES
   Monitoring the level of external debt
   Keeping outstanding debt and debt burden
    at manageable levels
   Obtaining the best available terms and
    conditions for foreign financing and avoid
    bunching of maturities


       Bangko Sentral ng Pilipinas
     EXTERNAL DEBT MANAGEMENT
          IN THE PHILIPPINES

BSP DEBT MANAGEMENT TOOLS

  Regulatory issuances (policies and
   procedures)
  Administrative mechanisms (approval and
   registration process; reporting system)
  Observance of ceilings on new commercial
   MLT loans and outstanding ST public sector
   debt
  Debt Strategies
     Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES
REGULATORY & ADMINISTRATIVE
FRAMEWORK
   Public Sector Borrowings –
     All loans of the government, its
     instrumentalities and agencies (e.g., LGUs,
     GFIs & GOCCs) require prior BSP approval
   Private Sector Borrowings
     Loans which carry public or banking sector
     guarantee or which will be serviced with
     foreign exchange purchased from the
     banking system require prior BSP approval
       Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
             IN THE PHILIPPINES
PUBLIC SECTOR BORROWINGS
 Evaluation stages:

           Approval-in-Principle



                Negotiation


                  Final
                 Approval


     Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES
PUBLIC SECTOR BORROWINGS
Approval-in-Principle – gives the borrower
 clearance to negotiate with the creditor
Negotiation – borrower may proceed to negotiate
 with creditor
 The Inter-Agency Committee for Review of
 Foreign Loan Documents (IAC-RFLD) serves as
 a forum in reviewing the covering agreements.
Final Approval – the terms as finally negotiated
 are compared with the terms as approved-in-
 principle to determine consistency with &/or
 deviations therefrom.
        Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES

PRIVATE SECTOR BORROWINGS
  Evaluation stages:

                Approva
                  l



                             Registratio
                             n

       Bangko Sentral ng Pilipinas
       EXTERNAL DEBT MANAGEMENT
            IN THE PHILIPPINES

PRIVATE SECTOR BORROWINGS
Approval – gives the borrower clearance to
conclude negotiations & finalize/sign loan
documents
Registration – the borrower is given authority to
purchase foreign exchange from the banking
system to cover payment of principal, interest,
and other charges
BSP reviews copies of signed loan agreements for
compliance with approved terms and conditions,
and determines whether funds were actually
       Bangko Sentral ng Pilipinas
disbursed & utilized.
        EXTERNAL DEBT MANAGEMENT
               IN THE PHILIPPINES
DEBT MONITORING
SYSTEM
  The Philippine external debt monitoring
   system covers all data categories such as:
      by borrower
       (public, private, bank and non-bank);
      by original and residual maturity
       (short-term, medium- and long-term);
      by creditor type;
      by currency; and
      by country

       Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
             IN THE PHILIPPINES
DEBT MONITORING
SYSTEM
 Principal data sources include regular reports
  from borrowers, banks and other financial
  institutions and selected creditors plus news
  articles in local and international publications
 BSP requires submission of monthly reports
  on the status of BSP-approved loans and
  transactions
 BSP also requires borrowers that did not
  seek prior approval of their loans to submit
  monthly reports for statistical purposes to
  allow compilation of comprehensive debt
        Bangko Sentral ng Pilipinas
  statistics
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES
DEBT STRATEGY
  Optimization of available foreign financing by
  Identifying projects eligible for financing
  –
  encouraging credits with longer tenor and
   lower cost
  encouraging private sector participation in
   development efforts through BOT and other
   new financing schemes
  closely coordinating approaches to
   international capital markets to avoid
   competition among Philippine borrowers

       Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES
DEBT STRATEGY
FX Liberalization
 Lifting of BSP approval and registration
  requirement for Private sector provided loan
  –
• Is not guaranteed by public sector/banks
• Will not be serviced with FX from banking
  system
 Full discretion for disposition of residents’
  FX receipts
BUT
  BSP Bangko Sentral ng Pilipinas
        Reporting requirement maintained
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES
DEBT STRATEGY

Diversification of Funding Mode and Source
Tapping Private Sector as Partner for Development
 BOT Law
 Deregulation of key industries




      Bangko Sentral ng Pilipinas
       EXTERNAL DEBT MANAGEMENT
            IN THE PHILIPPINES

         POST 1983 DEBT SITUATION
Measures to manage capital surge
 Reserve build up
 Limits on bank’s FX position
 Liberal rules on outward investments and
  capital withdrawal for investments under debt
  to equity conversion program
 Allowed residents to (a) retain FX receipts and
  (b) open/maintain FX deposit accounts
  onshore and offshore

       Bangko Sentral ng Pilipinas
        EXTERNAL DEBT MANAGEMENT
             IN THE PHILIPPINES

           THE 1997 ASIAN CRISIS

         Widening of spreads on debt
          papers
      Volatile Peso/Dollar exchange
Confidence in Philippine Debt Monitoring
          rate
  System
 Well managed and provides up-to-date data
 Allows comparisons with other statistics
 Inclusion in new international debt guide:
Philippine monitoring system for private sector
       Bangko of best ng Pilipinas
      as exampleSentral country practices
    EXTERNAL DEBT MANAGEMENT
         IN THE PHILIPPINES


Policy Initiatives
 Amortizing versus bullet payment terms
 Staggered purchase of FX for debt
  servicing
 Hedging mechanism for FX obligations
 Documentation of FX sales by banks
 Alignment of rules for bank-affiliated
  Forex Corporations

     Bangko Sentral ng Pilipinas
Philippine External Debt: Profile as of March 31,
                      2004

                          By Original Maturity                               By Remaining Maturity     ST plus portion
Weighted                                                                                               of MLT debts
Average                                                                                                falling due
Maturity Total =                                                                                       within next 12
17.3 yrs
                                     ST
                                    13%
                                                                                          ST           months
                                                                                         22%

Public = 19.5 yrs
                                                                                 MLT
Private = 11.2                            MLT                                    78%
                                          87%
yrs




       By Borrower                                   By Creditor                                     By Currency


                                                         Others
                                                          7%                                           Others
                                                                                                        11%
      Private
       33%           NG                          Bonds            Official
                    44%                          27%               46%                           JPY            USD
                                                                                                 29%            51%


                                                         BFIs
     BSP                                                                                               MC
            GOCCs                                        20%
     7%                                                                                                9%
             16%
                 Philippine External Debt: 1997 to March 31, 2004
                 80
                                 1997
                         By Original Maturity
                 70
                                    ST
                                   15%
                 60

                             MLT
In Billion USD




                 50          85%
                                                                              March 2004
                                                                            Original Maturity
                 40
                                                                                       ST
                                                              MLT                     13%
                 30

                 20                                                             MLT
                                                                                87%


                 10
                                                              ST
                  0
                  1997         1998             1999   2000   2001   2002         2003          2004
             Philippine External Debt: 1997 to March 31, 2004
                 80            1997
                         Remaining Maturity

                 70                 ST
                                   21%


                 60
                             MLT
                             79%
                                                                                March 2004
In Billion USD




                 50                                                          Remaining Maturity

                 40                                                                      ST
                                                                                        22%


                 30                                               MLT
                                                                                 MLT
                                                                                 78%

                 20
                                              ST Portion of MLT
                 10
                                                                  ST
                 0
                      1997         1998         1999     2000      2001   2002      2003          2004
                 Philippine External Debt: 1997 to March 31, 2004
                 80
                               1997
                           By Borrower
                 70

                         Private
                 60       38%
                                   Public
                                    62%
In Billion USD




                 50                                                Private

                 40                                                                 March 2004
                                                                                    By Borrower

                 30                                       Public

                                                                                    Private
                 20                                                                  33%
                                                                                              Public
                                                                                               67%

                 10

                  0
                  1997         1998         1999   2000       2001           2002      2003            2004
             Philippine External Debt: 1997 to March 31, 2004
                 80               1997
                               By Creditor

                 70
                 60          Comme
                              rcial
                              49%
                                       Official
                                        51%
In Billion USD




                 50
                                                                                      March 2004
                 40                                        Commercial
                                                                                      By Creditor

                 30
                 20                                                                  Comme
                                                                                      rcial
                                                                                                Official
                                                                                                 44%
                                                                                      56%
                                                            Official
                 10
                 0
                      1997            1998        1999   2000          2001   2002       2003              2004
                 Philippine External Debt: 1997 to March 31, 2004
                 80             1997
                             By Currency

                 70              Others
                                 7.6%
                          JPY
                         23.9%             USD
                 60                       54.7%
                            MC
                           13.9%
                                                                      Loans from WB and
In Billion USD




                 50                                          Others   ADB committed in
                                                                      USD but disbursed and
                 40                                                   repaid in various
                                              Japanese Yen            currencies              March 2004
                                                                                              By Currency
                 30                               Multi-Currency
                                                                                              Others
                                                                                              11.2%
                 20                                  US Dollar                                            USD
                                                                                           JPY
                                                                                                         51.2%
                                                                                          28.6%

                 10                                                                                MC
                                                                                                  9.0%



                  0
                  1997              1998          1999       2000     2001        2002            2003           2004
     EXTERNAL DEBT MANAGEMENT
          IN THE PHILIPPINES
Ratio of Debt Service Burden to GNP and
  XGSI
1983 to 2003




     Bangko Sentral ng Pilipinas
     EXTERNAL DEBT MANAGEMENT
          IN THE PHILIPPINES
Ratio of Reserves to DSB and ST Debt
1983 to 2003




     Bangko Sentral ng Pilipinas
      EXTERNAL DEBT MANAGEMENT
           IN THE PHILIPPINES

               CONCLUSION
 Encouraging developments
 Reliance on external financing to continue
 Policies will continue to be proactive
  and market-oriented but consistent with
  regulatory concerns
 Continuing review and improvement of debt
  monitoring system


      Bangko Sentral ng Pilipinas
EXTERNAL DEBT MANAGEMENT
     IN THE PHILIPPINES

				
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