Philippines’ External Debt Falls by $2.02 Billion

The Philippines’ total external debt declined by $2.02 billion in the fourth quarter of 2024, reaching $137.63 billion by the end of December, according to the Bangko Sentral ng Pilipinas (BSP).

The debt-to-GDP ratio also improved, dropping to 29.8% from 30.6% in the previous quarter, reflecting the country’s economic growth of 5.2% in Q4 and 5.6% for the full year.

BSP attributed the decline in external debt to foreign exchange (FX) revaluation, net acquisition of Philippine debt securities by residents, and net repayments by both public and private sector borrowers.

External debt refers to borrowings owed by residents to non-residents, including loans from foreign banks, bonds issued to international investors, and debts to multilateral institutions.

A lower external debt level is generally seen as a positive indicator of a country’s ability to manage its financial obligations.

Factors Behind the Decline

The $2.02 billion drop in external debt was primarily driven by three factors:

FX Revaluation – The appreciation of the US dollar lowered the value of the country’s outstanding foreign currency borrowings by $1.29 billion.

Net Acquisition of Debt Securities – Local investors bought $835.33 million worth of Philippine debt securities from foreign holders, reducing external debt.

Net Repayments – The country repaid $133.51 million in foreign obligations, reversing the net borrowings recorded in the first three quarters of 2024.

Public vs. Private Sector Debt

Public sector external debt fell by $1.54 billion to $85.34 billion, mainly due to a $1.44 billion FX revaluation.

Around 92.9% of public debt, or $79.31 billion, belongs to the National Government, while the remaining $6.03 billion is owed by government-owned corporations and financial institutions.

Private sector debt also declined slightly, reaching $52.29 billion, reflecting a $473.35 million drop from the previous quarter. This was driven by local purchases of offshore debt securities and a $70 million net repayment by private borrowers.

Debt Profile and Sustainability

Medium- and long-term (MLT) debt accounted for 79.7% of the total, amounting to $109.72 billion, while short-term (ST) debt made up 20.3% ($27.91 billion).

The country’s foreign exchange reserves stood at $106.26 billion at the end of 2024, enough to cover 3.81 times the short-term debt, ensuring strong repayment capacity.

However, the debt service ratio (DSR), which measures the proportion of debt payments to export earnings, rose to 11.5% from 10.3% a year earlier due to increased repayment obligations.

Major Creditors and Currency Composition

Japan remained the country’s top creditor, holding $15.18 billion in loans, followed by Singapore ($5.06 billion) and the Netherlands ($4.55 billion).

The majority of the country’s debt was denominated in US dollars (74%), followed by Philippine pesos (9.2%) and Japanese yen (7.5%).

Outlook for 2025

BSP expects external debt to remain manageable as the government prioritizes fiscal discipline and economic growth.

Despite global uncertainties, the country’s strong foreign reserves and lower debt-to-GDP ratio signal financial stability moving forward.