By MAX ESTAYO

The Philppine debt level, according to Bangko Sentral ng Pilipinas deputy governor Diwa Guinigundo is more sustainable.

The country last year prepaid $2.54 billion in 2007.

The prepayments, Guinigundo said improved the country’s external debt-to gross domestic product rati from a high 54.9 percent in end-2005 to 40.4 percent as of September last year.

"The decrease in the debt ratios show that the debt levels are becoming more sustainable, which, in turn, helps reduce the economy’s vulnerability to external shocks," Guinigundo said.

He said this development was partly behind Moody’s Investors Service’s recent upgrade of the country’s credit rating outlook to positive from stable.

Guinigundo said the government and businessmen are prepaying foreign debts encouraged by the strong peso.

The private sector accounted for most of the prepayments at $1.61 billion with the balance of taken by the government, Guinigundo said. The BSP prepaid $805 million and the national government, $126 million.

The pre-termination cut the country’s external debt stock of $36.1 billion as of September last year to $33.56 billion.

Specifically, it lowered the country’s dollar debt to $22.08 billion from $24.62 billion.

Of the country’s external debt as of September, the bulk or 68.2 percent were denominated in dollars. The Japanese yen accounted for 22.2 percent and euros, 5.1 percent. The rest of the debts were in other smaller currencies.

An improvement in the country’s credit rating, in turn, lowers the borrowing costs of the government and private corporations, Guinigundo said.

Last year was the second time the country prepaid callable debts. In 2006, the country pre-terminated a total of $3.66 billion, composed of $2.074 billion of the public sector and $1.586 billion of the private sector.

The public sector’s prepayments made up of the BSP’s $1.395 billion and the national government’s $679 million.

The BSP does not provide data on the specific entities, whether public or private, that make prepayments.

This year, the national government is readying to prepay debts with callable provisions, to avoid penalties that would make the effort more expensive than actually holding the debt to maturity.

Initially, it is looking at $2.4 billion that government-owned and -controlled corporations can retire ahead of maturity.

The BSP has no other external debts with callable provisions, hence, can no longer make another prepayment.

The prepayments are being undertaken to help slow the peso’s appreciation and protect vulnerable sectors such as the overseas Filipinos and the exporters.