Foreign debt service bill falls nearly 23% at end-October

The Philippines’ debt service on foreign loans went down by about 23% year on year at end-October as principal and interest payments fell, the Bangko Sentral ng Pilipinas (BSP) reported.

Based on preliminary central bank data, the foreign debt service bill declined by 22.94% to USD 11.02 billion in the 10-month period from USD 14.3 billion a year ago.

October marked the fifth straight month that the country’s external debt service burden fell on an annual basis.

This came as principal payments plunged by an annual 41.04% to USD 4.513 billion at end-October from USD 7.654 billion a year ago.

Meanwhile, interest payments stood at USD 6.507 billion at end-October, slipping by 2.09% from USD 6.646 billion in the previous year.

“(This was) largely due to lower foreign debt maturities, as well as reduced share of foreign borrowings in the National Government’s (NG) borrowing mix in the total borrowing mix in recent years to better manage forex (foreign exchange) risks entailed in external borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

In 2025, the NG sought to borrow 81% or P2.11 trillion of its P2.6-trillion financing from local lenders. It previously observed a 75:25 borrowing mix in 2024 in favor of domestic creditors.

The debt service bill 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 bank 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 data exclude prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and nonbanks.

At end-October, the external debt service burden as a share of gross domestic product (GDP) stood at 2.9%, lower than the 3.9% from the previous year.

“We’re seeing the external debt service burden ease because borrowers — both public and private — managed to refinance more smartly as global rates stabilized, reducing the amount of high‑cost foreign obligations falling due this year,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said via Viber.

Mr. Ricafort also noted that the US Federal Reserve’s recent rate cuts lowered interest payments on foreign debts.

The Fed has so far lowered key borrowing costs by 175 basis points since September 2024, bringing its policy rate to the 3.5%-3.75% range.

BSP data also showed that the country’s outstanding external debt rose to its highest yet at USD 149.093 billion as of September, up by 6.77% from USD 139.643 billion a year ago.

This topped the previous record of USD 148.873 billion seen in the second quarter.

As of end-September, the external debt-to-GDP ratio came in at 30.9% from 30.6% in the comparable year-ago period.

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.

The central bank gathers data on external debt through reports submitted by borrowers, banks, and major foreign creditors.

“Going forward, risk of forex losses would still lead to a tempered approach in increasing foreign borrowings to finance the budget deficit,” Mr. Ricafort said.

“Continued or wider budget deficits would lead to higher programmed foreign commercial borrowings of the National Government, as signaled a few weeks ago,” he added.

The National Government’s budget deficit fell by 26.02% year on year in November to PHP 157.6 billion, reversing from the PHP 11.2-billion surplus in October, according to Treasury data.

In the 11-month period, the fiscal deficit widened to PHP 1.26 trillion from PHP 1.18 billion a year ago.

Meanwhile, Mr. Ravelas said debt servicing on external borrowings may continue to decline until yearend due to elevated base effects from 2024 and smoother maturity schedule last year.

“Given the high base (in 2024) and the smoother maturity schedule (in 2025), the year‑on‑year decline will likely continue in the last two months unless there’s a sudden spike in global rates or a sharp peso slide,” he said. “For now, the trend points to improving the breathing room on the external front.” — Katherine K. Chan, Reporter