THE country's debt service burden rose in February, preliminary Bangko Sentral ng Pilipinas (BSP) data showed, hitting $2.38 billion or 7.1 percent higher than the $2.23 billion recorded a year earlier.

Principal payments fell by 0.17 percent to $1.176 billion from $1.178 billion, but interest payments increased by 15.3 percent to $1.208 billion from $1.048 billion.

The debt service burden includes principal and interest payments on medium- to long-term credits like those from the International Monetary Fund, loans subject to Paris Club agreements and debt restructuring by commercial banks, as well as New Money Facilities.

It also includes interest payments on fixed and revolving short-term liabilities of banks and nonbanks but not prepayments on future years' maturities of foreign loans and principal payments on fixed and revolving short-term liabilities.

The country's outstanding external debt reached $125.4 billion last year, some 12 percent higher compared to year-earlier $111.3 billion.

Broken down, $77.8 billion of the amount was owed by the public sector, up 15.5 percent from the $67.4 billion recorded in 2022.

Private-sector debt amounted to $47.6 billion, 8.4 percent higher than the $43.12 billion reported at the end of the same period last year.

As a percentage of gross domestic product (GDP), the debt service burden rose to 3.4 percent as of end-2023 from 2.1 percent a year earlier.

External debt, meanwhile, was equivalent to 28.7 percent of GDP from 27.5 percent at the end of 2022.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the higher foreign debt servicing was largely due to higher global interest rates.

He added that the increased foreign borrowings also weighed on the higher external debt.

"Possible rate cuts by the Fed and other global central banks later in 2024 and in 2025 could somewhat help curb/mitigate the national government's debt servicing bill," Ricafort said.

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