Amando M Tetangco, Jr: Managing external debt, a move to ensure
economic growth
Speech by Mr Amando M Tetangco, Jr, Governor of Bangko Sentral ng Pilipinas (the central
bank of the Philippines), at the launch of the Foreign Loan Approval and Registration System
(FLAReS), Manila, 20 March 2012.
* * *
I wish to thank everyone for joining us today for the launch of FLAReS or the Foreign Loan
Approval and Registration System. This is the newest BSP electronic innovation and is part
of our continuing efforts to enhance the delivery of services to our stakeholders.
The vision
Through the years, the BSP has consciously and progressively adopted measures to move
towards a paperless system. Taking advantage of the prevalence of the internet and the
robustness of the PhilPass, the FLAReS project certainly takes us another step closer to this
vision.
As you saw from the presentation of the operational highlights, FLAReS will facilitate the
submission of applications for approval and registration of loans via the internet... Payment
of processing fees will likewise be more convenient, using the branch network of participating
banks.... Finally, participants will be able to monitor the status of applications online... It is
our expectation therefore that FLAReS... in addition to improving operational efficiency... will
also move us towards greater transparency in our delivery of services to stakeholders.
Today, FLAReS is realized because of the active partnership of a select group of
banks - Banco De Oro, Bank of the Philippine Islands, Land Bank of the Philippines and the
Philippine National Bank. .... I would also like to express our appreciation to the public and
private sector borrowers who provided useful feedback and cooperated in the pilot testing of
FLAReS. ....Of course, this project would not be possible without the creative ideas and
critical support of the officers and staff of the Bangko Sentral ng Pilipinas who collaborated to
see the project to its completion, particularly the International Operations Department under
the International Sub-Sector, the Information Technology Sub-Sector, the Payments and
Settlements Office, and the Financial Accounting Department.
The reason
The launch of FLARes is indeed quite timely, in light of all the developments in external debt
dynamics across the globe. While I don't believe the Philippines is about to enter any kind of
external debt crisis... any time soon....I believe now is a good time to take stock... and be
reminded (through the experiences in other jurisdictions) of the possible consequences
- both intended and otherwise - of a country's cumulative decisions and actions with respect
to debt...
It is also wise for a country to institutionalize governance practices that would precisely avoid
such a crisis... during a time when such is the least of the country's concerns.
The season
The Philippines is in a good spot today. As can be gleaned from major external debt
indicators, the BSP has been successful in its debt management efforts. Key ratios such as
Gross International Reserves to Short-term Debt, Outstanding Debt to Gross National
Income and Debt Service to Foreign Exchange Receipts have consistently strengthened,
indicating the country's sustained and improving ability to meet maturing obligations. We
have recently announced that our gross international reserves have reached an all-time high
of US$77.7 billion as of February 2012. Relative to short-term debt, our current GIR can
cover nearly 11 times our short-term debt under the original maturity concept, and about
7 times using the residual maturity concept.
At 27.5pct, our external debt to GDP has been on a downtrend during the past decade. It is
now less than half its high over the 10-year period of 68.6pct in 2003.
Likewise, the maturity of our external debt has been lengthened, with close to 90 percent of
our external debt being long-term. .. The average maturity is now about 22 years.
The debt service ratio (or the amount of principal and interest payments due relative to
exports of goods and receipts from services and income) has droppedfrom 15.7 percent in
2001 to only 8.4 percent by November 2011, or less than 10 cents per dollar of income.
By all indicators, therefore, the Philippines is well-positioned to adopt these changes.
The champion
You may ask, why is the BSP taking on FLAReS? Well, quite simply, external debt
management is part of our mandate as the central monetary authority.
The Bangko Sentral is mandated by the Philippine Constitution and other pertinent laws to
manage the country's external debt. Our objective is to keep outstanding obligations at
prudent levels so that these can be comfortably serviced by the economy in an orderly and
timely manner.
In pursuit of this mandate, the Bangko Sentral coordinates with other government agencies,
and employs various debt management tools. These tools include an approval and
registration process which is being implemented by the International Operations Department,
and is instrumental in directing externally-sourced funds to priority areas for development
and influencing the impact of borrowings on the profile and structure of total external debt.
A continuing review of Bangko Sentral regulations governing external debt and other foreign
exchange transactions is likewise undertaken to keep our rules attuned with current global
and domestic conditions and to foster a regulatory environment that supports the objective to
achieve inclusive growth for the country.
In all these undertakings, a good monitoring system is indispensable. FLAReS allows us to
perform all these with relative ease and accuracy.
Conclusion
I have, on a number of occasions in the past, said that the Philippines managed to "survive"
today's crisis, because we purposed to invest in the reforms yesterday.... And today, ladies
and gentlemen, we add FLAReS to the list of governance reforms we have instituted.
As we enlist public and private sector entities to enroll in FLAReS and encourage more
banks to participate, it is my hope that FLAReS would indeed help us better manage our
external debt. In turn, I hope this will ensure and protect our desired trajectory of sustained
higher economic growth.
Maraming salamat sa inyong pagdalo at pakikinig.