By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES’ remarkable foreign obligations ascended by almost 10% year over year as of the close of 2024, according to the Bangko Sentral ng Pilipinas (BSP).
Initial statistics indicated that the nation’s foreign debt surged by 9.8% to $137.63 billion as of the end of December 2024, compared to $125.39 billion during the same time in 2023.
Nonetheless, the total debt slightly decreased by 1.4% quarter on quarter from the peak of $139.64 billion at the end of September.
Foreign debt encompasses all manners of borrowings by residents from outside lenders.
“The expansion was mainly propelled by net availments of $9.61 billion to fulfill liquidity needs within both the public and private sectors,” the central bank noted.
BSP data revealed that net availments in the public sector reached $5.59 billion last year, while the private sector accumulated $4.03 billion in net availments.
“The net purchase of Philippine debt instruments by international investors of $3.37 billion, driven by investor preference for emerging market debt securities throughout much of 2024 and previous adjustments totaling $634.76 million, further added to the debt stock.”
“Conversely, the adverse foreign exchange (FX) revaluation of borrowings in various currencies amounting to $1.39 billion moderated the rise in total debt,” it added.
Consequently, the foreign debt as a percentage of gross domestic product (GDP) declined to 29.8% from 30.6% in the third quarter but remained higher than the 28.7% observed in 2023.
The central bank asserted that the foreign debt-to-GDP ratio is still at a “prudent” level.
“The enhancement in the ratio was due to the reduction in foreign debt in conjunction with the Philippine economy’s 5.2% real GDP growth in the fourth quarter and 5.6% growth for the entire year,” it added.
In the meantime, the BSP attributed the 1.4% decline in debt stock quarter-on-quarter to the negative FX revaluation of borrowings in other currencies.
It also mentioned the “net purchase by residents of Philippine debt securities from foreign creditors totalling $835.33 million; along with net repayments of $133.51 million.”
“In the reference quarter, the strengthening of the US dollar diminished the country’s debt stock value by $1.29 billion,” it stated.
As of the end of 2024, the peso traded at P57.845 against the dollar, dropping by P2.475 or 4.28% from its end-2023 rate of P55.37 against the US currency.
“The US dollar gained strength owing to enhanced performance of the US economy and market perceptions concerning the Federal Reserve’s prospective policy direction, alongside expectations for shifts in US trade and investment policies with the incoming administration.”
“The same underlying factors may have also prompted international investors to offload Philippine debt securities, further reducing outstanding foreign debt by $835.33 million,” it elaborated.
Disaggregated, external debt from the private sector decreased by 0.9% to $52.29 billion by the end of the fourth quarter from $52.76 billion at the end of the third quarter.
“The slight reduction in private sector borrowings was attributed to the net purchase by residents of offshore-issued debt securities totalling $870.03 million,” the BSP stated.
It also referred to the adverse FX revaluation of borrowings denominated in other currencies amounting to $154.11 million and net repayments of $70 million, which offset adjustments from preceding periods of $313.98 million.
Public sector debt fell by 1.8% to $85.34 billion at the end of the fourth quarter from $86.88 billion at the close of the third quarter.
This decline was due to the negative FX revaluation of borrowings in other currencies amounting to $1.44 billion.
“Adjustments from earlier periods totaling $71.23 million, as well as net repayments of $63.51 million further decreased the outstanding levels.”
The majority, or 92.9%, of public sector obligations originated from the National Government, while the remainder was from borrowings of government-owned and controlled enterprises, government financial institutions, and the BSP.
The Philippines’ leading creditor nations included Japan ($15.18 billion), Singapore ($5.06 billion), and the Netherlands ($4.55 billion).
The borrowing composition mainly consisted of US dollar-denominated debt (74%), followed by debt in Philippine pesos (9.2%) and debt in Japanese yen (7.5%).
The central bank noted that other principal external debt indicators also remained at “sustainable levels.”
As of the end of 2024, the country’s gross international reserves (GIR) stood at $106.26 billion, representing 3.81 times coverage for short-term (ST) debt based on the remaining maturity concept.
“The debt service ratio (DSR) increased to 11.5% from 10.3% for the corresponding period last year due to higher recorded debt service outlays.”
The DSR and the GIR coverage for short-term debt are indicators of the sufficiency of foreign exchange earnings to meet imminent debt obligations.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort indicated that the enduring National Government budget deficit contributed to the escalation of external debt.
“The budget deficit fundamentally resulted in increased local and foreign borrowings and accumulated debt, despite enhancing the proportion of local borrowings in the overall borrowing structure to better address foreign exchange risks linked to external debt,” he stated.
The National Government’s budget deficit lessened by 0.38% to P1.506 trillion in 2024, down from P1.512 trillion in 2023. However, it surpassed the P1.48 trillion deficit limit set by the Development Budget Coordination Committee.
Looking ahead, the portion of external debt within the entire borrowing composition is anticipated to decrease, Mr. Ricafort noted.
“Some recent foreign borrowings were intended to diversify funding sources for the National Government and to improve the liquidity of global bonds in the international marketplace,” he asserted.
In January, the National Government secured $3.3 billion from the issuance of 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds. This marked the National Government’s first global bond offer for the year.
The administration plans to secure P2.55 trillion in financing this year, of which P507.41 billion is expected to be sourced from abroad.