The country pre-terminated a total of $4.4 billion in
foreign debts last year, the Bangko Sentral ng Pilipinas said yesterday.
It was the first time the country made prepayments on
its foreign obligations. Prepayment allows a borrower to save on
interest payments.
BSP deputy governor Diwa Guinigundo said the prepaid
loans included those of the national government, the BSP and the private
sector.
He did not say how much savings in interest payments
were generated from the prepayments.
But he said the pre-termination had the effect of
helping cut the level of the country’s external debt and lower the high
debt to GDP ratio.
The national government and the BSP prepaid a total
of $1.8 billion last year, Guinigundo said, broken down into $1.3
billion for the former and $538 million for the latter.
The private sector accounted for the bulk, prepaying
$2.6 billion last year, Guinigundo said, without naming the firms that
retired the debts ahead of maturity.
Iluminada Sicat, director of the BSP’s department of
economic research, said the prepayments were largely "unanticipated"
resulting in a net outflow in the capital and financial account last
year.
The account reversed to a $1.7 billion outflow from
$2.2 billion surplus a year earlier.
Guinigundo said the national government and the BSP,
as well as the private sector, took advantage of the strong peso to
retire a portion of their debts.
The peso gained eight percent last year, supported by
record-level growth in capital inflows and remittances.
The country’s balance payments or the summary of its
economic transactions with the rest of the world stood at $3.8 billion
surplus last year, ahead of the $2.8-billion forecast and stronger than
the $2.4 billion in 2005.
Guinigundo said prepayments are not incorporated in
the BOP projections.
The BSP expects a payments surplus of $1.6 billion
this year, supported by continued flows.
Guinigundo said it’s hard to "anticipate" if
companies will prepay again this year because "it’s a business
decision." But he said prepayments are not far off if the peso continues
to perform.
The peso has advanced by 1.6 percent year to date,
the second best performer in the region next to the baht.
With prospects of sustained growth in inflows,
Guinigundo said the BOP will remain in surplus.
"The outlook continues to be encouraging because we
expect momentum in the national economy. Growth will continue, our
capacity will be enhanced and competition will also improve our global
competitiveness," he said.
Guinigundo said the $1.6-billion BOP surplus forecast
will be reviewed in April taking into account the stocks selldown in
early March and the impact of the BSP’s liberalized foreign-exchange
policy, which takes effect April 2.
