External debt service burden slumps in Jan.

The Philippines’ external debt service burden slumped by more than 50% in January amid a sharp decline in principal payments, the latest data from the Bangko Sentral ng Pilipinas (BSP) showed. 

Preliminary data from the central bank showed debt servicing on external borrowings declined by 54.3% to USD 799 million in January from USD 1.75 billion in the same month in 2024. 

Broken down, amortization payments plunged by 92.5% to USD 79 million from USD 1.06 billion in the year-ago period. 

On the other hand, interest payments inched up by 3.8% to USD 719 million in January from USD 693 million a year ago. 

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the drop in debt servicing could be largely attributed to the lower amount of foreign debt maturity or principal payments at the start of the year versus a year ago. 

“This amid efforts in recent years to reduce the share of external borrowings in the total borrowing mix to reduce foreign exchange risks entailed in foreign debt,” he added. 

From this year until 2027, the National Government (NG) plans to source at least 80% of its borrowing program from domestic sources, and 20% from foreign lenders. The government previously adopted a 75:25 borrowing mix 

“This is also partly consistent with the budget surplus at the start of the year, after the seasonal increase in the budget deficit and debt payments towards yearend, a consistent pattern seen in recent years, thereby slowing down upon crossing the New Year,” Mr. Ricafort added. 

Data from the Treasury showed the NG posted a P68.4-billion budget surplus in January, though 22.27% lower than the P88-billion surplus a year ago. 

The debt service burden represents principal and interest payments after rescheduling, according to the BSP. 

This includes principal and interest payments on fixed medium- and long-term credits including International Monetary Fund credits, loans covered by the Paris Club and commercial banks’ rescheduling, and New Money Facilities. 

It also covers interest payments on fixed and revolving short-term liabilities of banks and nonbanks. 

However, the debt service burden data exclude prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and nonbanks. 

The latest data from the central bank showed the Philippines’ outstanding external debt rose by 9.8% to USD 137.63 billion as of end-December 2024 from USD 125.39 billion in the same period in 2023. 

This brought the external debt-to-gross domestic product (GDP) ratio to 29.8% at the end of 2024 from 28.7% at end-2023. 

At end-2024, the external debt service burden as a share of GDP stood at 3.7%, up from 3.4% at the end of 2023. 

The BSP’s external debt data cover borrowings of Philippine residents from nonresident creditors, regardless of sector, maturity, creditor type, debt instruments or currency denomination.   – Luisa Maria Jacinta C. Jocson, Senior Reporter