A stronger Dollar contributed to a decrease in the country's external debt last year, according to a statement by the Bangko Sentral ng Pilipinas (BSP).

The amount owed to foreign creditors dropped by $2.02 billion to $137.63 billion by December's end, marking a 1.4% decline from $139.64 billion three months earlier.

As a share of GDP, the central bank noted that external debt remained at a “prudent level” of 29.8%, down from 30.6% at the end of September.

“This improvement in the ratio was driven by the decline in external debt levels in conjunction with the Philippine economy's 5.2% real GDP growth for the fourth quarter of 2024 and 5.6% growth for the full year 2024,” the BSP said in a statement.

The Dollar's gains reduced the country's debt stock by $1.29 billion during the last three months of the year. The greenback strengthened as the US economy showed improvement, and markets responded to the Federal Reserve's policy outlook, along with expectations of a shift in US trade and investment policies following Donald Trump's return to the White House, the BSP added.

“The same underlying factors may have also triggered non-residents to offload Philippine debt securities, further lowering outstanding external debt by $835.33 million,” the BSP said.

In addition, in the last three months of 2024, foreign borrowings reversed the net availments seen in the first three quarters of the year.

From October to December, there was a net repayment of $133.51 million, primarily driven by lower net borrowings by non-bank public sector entities ($178.62 million), as well as net repayments by private sector non-banks ($212.85 million) and the banking sector ($99.27 million), The Manila Times.

Meanwhile, prior adjustments contributed an increase of $242.74 million to the total debt.

The debt service ratio, which measures the country's ability to meet debt obligations by comparing debt payments to export earnings, increased to 11.5% from 10.3%. The BSP also reported that gross international reserves reached $106.26 billion, offering 3.81 times coverage for short-term debt.

The public sector's external debt amounted to $85.34 billion, a decrease from $86.88 billion at the end of September, primarily due to foreign exchange valuation effects, adjustments, and net repayments.

Whereas private sector debt also saw a slight decrease, falling to $52.29 billion from $52.76 billion. This was attributed to local investors repurchasing offshore debt, foreign exchange valuation losses, and loan repayments.