The economic crisis as well as the weakening of the peso have affected the country's ability to trim its foreign debt, with the public sector and some private entities postponing prepayments during the first three months of the year.

According to the Bangko Sentral ng Pilipinas (BSP), total debt prepayments dropped dramatically to only $16.8 million in the first quarter of 2009 from $467.6 million in the same quarter last year.

The central bank noted that the private sector accounted for the full amount of foreign debts prepaid during the period as the national government and state-owned corporations halted payments.

In 2007, when the peso was strong, both private and government entities accelerated the settlement of their foreign debts before maturity, with total prepayments reaching $3 billion, the highest level since the Asian financial crisis. A strong peso makes foreign-currency obligations cheaper.

However, prepayments started to ebb in 2008 as the peso began to depreciate against the US dollar, given the slowdown in the inflow of foreign investments in fixed assets and financial instruments like stocks and bonds.

The BSP said some borrowers also opted to wait out the global recession.

Last year, foreign debt prepayments allowed the country to cut its total external debt to $53.9 billion from $54.9 billion in 2007, with the ratio of the external debt to gross domestic product (GDP) down from 38.1 percent to 31.9 percent.

The central bank said that the country's external debt ratio has been on a downtrend since 2002 and is now at its lowest level since 1986, when it peaked at 97.7 percent of GDP.

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

He said last year saw the GIR level at a historic high of $37.6 billion.

The ratio of GIR to short-term external debt improved to 5.4 percent in December from 4.4 percent in September under the original maturity concept, and to 3.4 from 3.0 under the remaining maturity concept.

Tetangco said the BSP also saw further improvement in the external debt service ratio (DSR) which was estimated at 9.6 percent in 2008, down from 10.1 percent in 2007.

This ratio is a measure of the adequacy of the country's foreign exchange earnings to meet maturing principal and interest payments. Tetangco said it has consistently remained well below the 20 to 25 percent international benchmark.