Despite a drop in interest payments, the Philippines’ external debt service burden still modestly increased to $5.87 billion at end-May from $5.84 billion in the same five-month period last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The 0.5-percent year-on-year increase in the country’s debt servicing on its foreign borrowings was driven by a 2.7-percent increase in principal payments, which stood at $2.65 billion as of end-May from $2.58 billion in the same period in 2024.

Meanwhile, end-May interest payments slipped by 1.2 percent to $3.22 billion this year from $3.26 billion last year.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the external debt service burden has grown as more of the government’s foreign borrowings, many of which were incurred during the Covid-19 pandemic, have started to mature.

While most of these obligations are long-term, rising annual budget deficits since 2020 have required additional financing through both domestic and external debt, Ricafort noted.

“The net increase in United States (US) interest rates since the pandemic is also a factor on interest payments of foreign debts,” he further said.

As of end-March, covering the past four quarters, the Philippines’ foreign debt jumped by 14 percent to $146.74 billion from $128.69 billion in the same period in 2024.

Foreign borrowings are equivalent to 27.8 percent of the country’s gross national income (GNI) as of end-March. This ratio climbed from 25.9 percent in the same period last year. It also climbed to 31.5 percent of gross domestic product (GDP) as of end-March from 29 percent a year earlier.

GNI measures the total income generated by a country’s residents, both domestically and abroad, making it a broader indicator of economic performance than GDP, which only accounts for local output.

By the end of the first quarter alone, the country’s external debt service burden lowered to 2.5 percent of GNI from 2.7 percent a year ago. Similarly, it stood at 2.8 percent of GDP, down from 3.1 percent in 2024.

According to the BSP, the foreign debt service burden represents principal and interest payments after rescheduling.

This covers payments on medium- to long-term loans, including those from the Washington-based multilateral lender International Monetary Fund (IMF), Paris Club agreements, commercial bank restructurings, and new money facilities.

It also includes interest payments on fixed and revolving short-term liabilities of banks and nonbanks.

However, it excludes prepayments on future maturities of foreign loans and principal payments on short-term obligations of banks and nonbanks.