External liabilities in the second quarter increased due to the PH lending frenzy

The Philippines owed the rest of the world more, by 19% year-on-year in the second quarter to 1,000 billion pesos this year compared to 873.6 billion pesos last year, according to the Bangko Sentral ng Pilipinas (BSP).

This was one of the findings of BSP’s Philippine Balance Sheet Approach, which assesses the country’s assets against liabilities, using the aggregate balance sheet of various sectors of the national economy.

The PASB said that the increase in the net external debt position was mainly due to the expansion of the net external debt position of general government and non-financial corporations (NFCs).

Likewise, the net debt position of the government as a whole widened 19.6 percent to 6.1 trillion pesos from 5.1 trillion pesos.

The regulator attributed this primarily to double-digit growth in the public sector’s net financial liabilities to the rest of the world, other deposit-taking institutions (CDOs) and the BSP itself. CDOs are deposit-generating institutions other than the BSP, such as financial corporations such as universal and commercial banks, savings banks, rural banks, non-equity savings and loan associations and non-equity banks. banks with quasi-banking functions.

In the second quarter, outstanding government loans increased 27.3 percent to 2.3 trillion pesos from 1.8 trillion pesos.

As for the SNFs, their net debt increased by 3.8% to 7.5 trillion pesos against 7.2 trillion pesos.

On the other hand, the net credit position of ODCs widened 18.9% to P2.1 trillion from P1.8 trillion amid growing claims on the BSP and the government.

In addition, ODCs investments in debt securities jumped 36.7% to P5.2 trillion from P3.8 trillion. They were mainly issued by the national government, BSP and non-residents.

In the second quarter, BSP’s net credit position contracted 2.3% to P590.1 billion from P603.8 billion. This followed a 23% drop in its net financial commitments to ODCs.

Central bank advances

BSP’s net claims on the government rose 32.7 percent to 640.8 billion pesos from 482.9 billion pesos as the central bank increased its investments in government securities and granted interim advances to the national government.

Interim advances are a temporary arrangement between PASB and the national government to provide the latter with access to ample cash resources while income generation is weakened and borrowing program execution resumed. caused by the magnitude of the need for borrowing as well as the unpredictability of financial markets in the midst of the pandemic.

Earlier this month, the Department of Finance (DOF) repaid the full amount of its overdue interim advances of 540 billion pesos to the BSP. This was done a month before the due date, which falls on January 12, 2022.

In addition, Finance Secretary Carlos Dominguez III informed the BSP that the national government will seek cash assistance of only 300 billion pesos in 2022, given the improved economic outlook.

The DOF intends to seek interim advances of 300 billion pesos in January, with terms similar to the 540 billion pesos loan – zero interest and a three-month maturity with another three-month extension.

By law, funds granted under this short-term loan agreement are not used for direct financing of government operations. Instead, they serve as a measure of the liquidity gap before income.

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