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March 23, 2009

Philippines: Weak peso slows foreign debt prepayment  
The weakening peso has taken its toll on the country’s ability to trim its foreign debt, as prepayments by both the private and public sectors fell last year, reported the Manila Times.

Bangko Sentral ng Pilipinas (BSP) data showed total pre¬payments dipped to $3.922 billion last year from $3.979 billion in 2007.

Of the total amount retired last year, the bulk pertained to private-sector debt at $3.024 billion. Public prepayments reached $897 million. The prepayments involved medium and long-term external obligations.

In January this year, total prepayments of $6.3 million were made by the private sector. The BSP said there is enough liquidity in the system that can support the growth of the economy.

It said banks should use its liquidity by lending more to the productive sectors to support economic growth.

In 2007, the BSP had encouraged the public and private sectors to prepay their loans to take advantage of the strong peso. This would help them save on interest payments and guarantee fees.

However, the prepayments slowed last year as the peso depreciated on risk aversion amid the global financial turmoil.
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