PHL foreign debt service bill drops at end-Nov.

By Katherine K. Chan, Reporter

THE PHILIPPINES’ external debt service burden fell for a sixth straight month as it continued to record lower principal and interest payments at end-November, preliminary central bank data showed. 

Based on data released by the Bangko Sentral ng Pilipinas (BSP), the country’s debt service bill on foreign loans amounted to $12.018 billion in the 11 months to November, down 22.82% from $15.571 billion a year ago.

“(This was) largely due (to) lower maturities of foreign debt in terms of principal payments vs. year ago levels,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Broken down, principal payments plunged by 41.87% to $4.77 billion as of end-November from $8.206 billion in the same period last year.

Interest payments likewise declined by 1.59% to $7.248 billion at end-November from $7.365 billion a year earlier, which Mr. Ricafort attributed to the US Federal Reserve’s recent rate cuts.

As of end-November, the Fed has cut the Federal Funds Rate by a total of 150 basis points (bps) following its 25-bp cut in October, which brought its policy rate to the 3.75%-4% range.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the country’s lower foreign debt service bill provides some support to the peso and gives the BSP additional policy room.

“The sharp drop in the external debt service burden tells us the Philippines had much less pressure to pay foreign debt in 2025, mainly because big principal repayments were lower,” he said in a Viber message. “That’s good news — it eases demand for dollars, supports the peso, and frees up some policy space.”

However, Mr. Ravelas said the government should not be complacent as interest payments remain elevated, noting that “this looks more like smart debt timing than permanently cheaper debt.”

Mr. Ricafort also noted that the lower share of foreign debt in the National Government’s (NG) total borrowing mix also helped bring down its external debt service bill.

“For the coming months, lower foreign borrowings in the total borrowing mix of the NG to reduce forex (foreign exchange) risk and possible further Fed rate cut/s would further lead to reduced foreign debt servicing bill,” he added.

Under the NG’s P2.6-trillion borrowing plan for 2025, 81% or P2.11 trillion was sourced from domestic lenders, with the remaining 19% from foreign sources. It previously observed a 75:25 borrowing mix in 2024 in favor of local creditors.

“The key next step is to keep borrowing disciplined — favor longer tenors, manage interest costs, and avoid letting future maturities bunch up again,” Mr. Ravelas added.

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.

As of end-September, the debt service burden as a share of gross domestic product stood at 2.9%, down from 3.9% in the prior year. There was no available data for end-November.

Meanwhile, the Philippines’ outstanding external debt rose by 6.77% to an all-time high of $149.093 billion in the third quarter from $139.643 billion in the same period last year, according to latest BSP data.

Quarter on quarter, it climbed by 0.15% to break the previous record of $148.873 billion.

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

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.