Foreign debt service bill falls to USD 6.72 billion

The Philippines’ external debt service burden dropped to USD 6.72 billion in the first half of the year as less foreign loans were due for repayment, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Debt service on external borrowings went down by 6.2% to USD 6.72 billion as of June from USD 7.164 billion in the same period in 2024.

Broken down, principal payments declined by 13.1% year on year to USD 2.77 billion in the January-to-June period from USD 3.189 billion.

Meanwhile, interest payments dipped by 0.7% in the first six months to USD 3.949 billion as of end-June from USD 3.976 billion last year.

“The decline in the Philippines’ external debt service burden in the first half mainly reflects lower principal repayments as fewer foreign obligations matured, alongside liability management efforts and a borrowing mix favoring domestic sources,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Mr. Asuncion also noted the decline in debt servicing shows the country’s foreign debts are manageable, giving the government more fiscal space and easing the strain on its dollar reserves.

Meanwhile, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said external debt servicing declined as foreign loans account for a smaller share in the National Government’s total borrowing mix.

“This could be attributed to the lower share of foreign borrowings in the total National Government borrowing mix in recent years to better manage (foreign exchange) risks entailed in foreign borrowings,” he said in a Viber message.

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 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.

In the first half, the debt service burden as a share of gross domestic product (GDP) fell to 2.8% from 3.2% in the comparable year-ago period.

Meanwhile, the country’s outstanding external debt reached USD 148.873 billion as of June, a 14.4% jump from USD 130.182 a year ago.

Of the total, USD 94.801 billion is public sector debt, while USD 54.072 billion is private sector debt.

This brought the external debt as a percentage of GDP to 31.2% in the first six months from 28.9% in the same period last year.

Mr. Asuncion said the government may see a slight uptick in its foreign debt service bill in the coming months as more foreign obligations will be due for repayment.

“For the second half, we expect a modest pickup as more amortizations fall due, but the debt service ratio should stay within a comfortable range given ample reserves and a still-favorable global rate environment,” he said.

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. — Katherine K. Chan