By Katherine K. Chan

THE COUNTRY’S external debt service burden fell to $10.08 billion as of end-September due to lower principal and interest payments, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Based on BSP data, the debt service bill on foreign borrowings came in at $10.08 billion in the nine-month period, dropping by 21.16% from $12.785 billion in the same period in 2024.

This was the fourth month in a row that the country’s external debt service burden posted an annual decline.

Broken down, principal payments fell by 39.05% to $4.168 billion as of September from $6.838 billion in the comparable year-ago period.

On the other hand, interest payments dipped by an annual 0.59% to $5.912 billion at end-September from $5.947 billion previously.

“Lower year-on-year foreign debt principal payments may have to do with reduced maturities of external debts (as) most have long-term maturities,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Mr. Ricafort also noted that the US Federal Reserve’s rate cuts since last year has lowered the Philippines’ interest payments.

The Fed has so far delivered a total of 175 basis points (bps) in cuts since September 2024, including its 25-bp cut earlier this month that lowered its target rate to the 3.5%-3.75% range.

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 January-to-September period, the debt service burden as a share of gross domestic product (GDP) fell to 2.9% from 3.9% in the previous year.

Meanwhile, the country’s outstanding external debt reached $149.093 billion as of September, climbing by 6.77% from $139.643 billion a year ago.

Of the total, $96.298 billion came from the public sector, while $52.796 billion is private sector debt.

This brought the external debt as a percentage of GDP to 30.9% in the nine months to September from 30.6% in the same period last year.

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.

Mr. Ricafort said fiscal policy and governance reforms could lessen the National Government’s (NG) reliance on domestic and foreign borrowing as a means to cover the country’s budget deficit.

“Fiscal reform, tax reform, anti-corruption (and) good governance reform measures would help narrow the budget deficit and, in turn, reduce the need for the NG to borrow more locally and from abroad to finance the budget deficit,” he said.

For this year, the NG plans to source at least 81% or P2.11 trillion of its P2.6-trillion borrowing program from local lenders, and 19% from foreign sources.