The government's and private companies' P1 billion worth of outstanding foreign loans pre-payments reduced the country's external debts to $53.9 billion in 2008, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The ratio of total external debt to gross domestic product likewise fell to 31.9 percent. This means the portion of domestic economic output that is set aside to pay off foreign debts instead of being used to fund social services and infrastructure investments has been lower than the 38.1 percent ratio in 2007.

The current ratio is the lowest level since 1986 when it peaked at 97.7 percent of GDP.

The BSP said, however, that the external debt level rose slightly by $374 million in the fourth quarter of 2008 compared with $53.5 billion in the third quarter, mainly because of the depreciation of the peso against the dollar.

External debt referred to all types of foreign borrowings by the public and private sector. The BSP approved and registered these borrowings.

BSP Governor Amando M. Tetangco, Jr. said the major external debt indicators continued to improve in 2008 due to the country's substantial foreign exchange receipts, comfortable level of international reserves, and sustained growth in national income.

"Gross international reserves (GIR) were at a historic high of $37.6 billion at the close of the year," Tetangco said.

Tetangco also noted that the external debt service ratio--or the ability of the country's foreign exchange earnings to cover payments for the interest charges and maturing portions of the principal--has improved to 9.6 percent in 2008. In the 9-month period ending September, it was 10 percent in 2008 and 10.1 percent in 2007.

Tetangco said the external debt ratio consistently remained well below the 20 to 25 percent international benchmark.

The creditor profile remained largely unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures, accounting for 45.2 percent of the country's total external debt, followed by foreign holders of bonds and notes (32.2 percent), and foreign banks and other financial institutions (16.8 percent). The rest of the creditors were mostly foreign suppliers and buyers.

The currency composition of external debt was as follows: U.S. dollar-denominated accounts, 49.7 percent of total; Japanese yen-denominated accounts, 30.4 percent; multi-currency loans from the Asian Development Bank and the World Bank, 9.8 percent; and the rest of the accounts comprising the 10.1 percent balance were denominated in 18 other currencies.