Foreign debt reaches all-time high in 2023

Up 12.7 percent to $125.4 billion

MANILA, Philippines — The country’s foreign debt reached another record high in 2023, as both the national government and the private sector borrowed more from offshore creditors, the central bank said.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s external debt rose by 12.7 percent to an all-time high of $125.4 billion in 2023 from $111.3 billion a year earlier.

The BSP said the increase was due to the $9.2-billion net availments last year, around $7.9 billion of which were borrowings by the National Government (NG).

Foreign debt also rose by 5.5 percent from the $118.8 billion recorded as of end-September 2023 due to net availments of $4.9 billion by both private and public sector borrowers.

“Private sector borrowings for the quarter were mainly driven by the $3 billion availment by a non-bank firm under a syndicated loan from offshore banks. Proceeds from said borrowings were used to finance its capital expenditures and maturing obligations,” the BSP said.

“Public sector borrowers, on the other hand, tapped official creditors and the Islamic finance market through the maiden issuance of the NG’s $1 billion 5.5-year dollar-denominated Sukuk bond to fund general financing requirements, infrastructure projects and social welfare programs,” it said.

The increase in external debt was also due to the positive foreign exchange revaluation. It was partly tempered by prior periods’ adjustments of $98 million.

Despite the increase in the debt stock, the external debt ratio remained at prudent levels, the BSP said. The external debt to gross domestic product ratio stood at 28.7 percent in the fourth quarter of 2023, higher than the 28.1 percent in the previous quarter and 27.5 percent in end-2022.

The debt service ratio rose to 10.2 percent from 6.3 percent a year ago due to higher principal and interest payments amid rising interest rates in 2023.

The maturity profile of the country’s external debt remained predominantly medium- and long-term in nature, with original maturities longer than one year with share to total at 86.4 percent, while short-term accounts with maturities of up to one year comprised the 13.6 percent balance.

According to the BSP, public sector external debt went up by 5.6 percent to $77.8 billion in end-2023 from $73.7 billion in end-September, accounting for 62.1 percent of the country’s foreign debt.

On the other hand, the private sector accounted for the remaining 37.9 percent or $47.6 billion of the total external debt.

Major creditor countries include Japan ($15.6 billion) followed by China ($4.7 billion) and the UK ($4.2 billion).

Borrowings from multilateral lending institutions and bilateral creditors have the largest share at 38.5 percent, followed by loans in the form of bonds or notes with a 32.7 percent share, and obligations to foreign banks and other financial institutions with 22.9 percent.

The remaining six percent came from other creditors such as suppliers and exporters.

In terms of currency mix, the country’s debt stock remained largely denominated in dollars (75.3 percent) and Japanese yen (nine percent). The rest pertained to 18 other currencies, including the Philippine peso, the euro and Special Drawing Rights.

The NG borrows heavily from foreign and domestic creditors to finance the country’s budget deficit as it spends more than what it actually earns.