The country’s foreign debt rose by 9.8 percent to $137.62 billion last year even as investors expect interest rates in emerging economies to remain elevated amid global uncertainties under the administration in the United States.

The Bangko Sentral ng Pilipinas (BSP) reported that foreigners’ net investments in Philippine debt securities amounted to $3.37 billion.

“The net acquisition of Philippine debt securities by non-residents resulted from investor preference towards emerging market debt securities for most of 2024,” the BSP said.

Debt payments reflected the inflationary impact of a weaker peso against the US dollar, amounting to P634.76 million.

However, the BSP said the total external debt was still lower by $1.39 billion due to the peso’s appreciation against other currencies.

In the fourth quarter of last year, the BSP said residents moderated issuances of debt instruments as elevated interest rates slowed consumption of goods and services during this period.

Thus, economic growth only inched up to 5.6 percent for the full year from 5.5 percent in 2023, based on data from the Philippine Statistics Authority.

The public sector decreased external borrowings by 1.8 percent to $85.34 billion in the fourth quarter from $86.88 billion in the third quarter.

Similarly, the private sector tempered foreign borrowings by 0.9 percent to $52.29 billion from $52.76 billion.

These drove down the total external debt in the fourth quarter by 1.4 percent to $137.63 billion from $139.64 billion in the third quarter.

The biggest lenders included Japan, which provided $15.18 billion, Singapore with $5.06 billion, and the Netherlands with $4.55 billion.

Loans mostly came from foreign multilateral and bilateral institutions, representing 39 percent of the total loans. This was followed by bonds and notes from banks with 33 percent and credit from exporters or suppliers with 5.2 percent.

The bulk, or 80 percent, of the loans had medium- to long-term maturities.

Debt instruments demand

In a recent report, the Institute of International Finance (IIF) said the demand for debt instruments in emerging markets (EM) like the Philippines will remain resilient.

“The Federal Reserve’s messaging has reinforced expectations that interest rates will stay elevated for longer, dampening risk appetite for EM assets,” IIF said.

“However, demand for EM debt remains resilient, with investors favoring local currency bonds in countries with stable policy frameworks,” the institute added.

BSP Governor and Monetary Board Chairman Eli Remolona Jr. said the benchmark for lending rates might be lowered by 25 basis points from 5.75 percent next month if local inflation slows.

In its monetary policy meeting last month, Remolona said the average inflation might inch up to 3.5 percent from the 3.4 percent estimate in December. For 2026, he said the BSP maintained the inflation outlook at 3.7 percent.

National statistics show inflation decelerated to 2.1 percent last month from 2.9 percent in January, marking the lowest level since October 2024.