Chile’s External Debt Climbs to 76.4% of GDP as Private Sector Risk Grows

According to the latest data from the Central Bank of Chile, the country’s external debt decreased to $246.9 billion in December 2024 from $248.3 billion in November.

This figure still represents a significant 2.4% increase from December 2023 when debt stood at $240.9 billion. The country reached an all-time high of $254.4 billion in September 2024.

Chile‘s external debt now accounts for 76.4% of GDP, up from 71.7% in 2023. Non-financial companies shoulder the heaviest burden with approximately $118.1 billion, followed by foreign direct investment at $55.1 billion.

The government sector contributes $46.8 billion, while banks add another $31.1 billion to the total. Most Chilean external debt remains long-term, which provides some stability against immediate liquidity pressures.

Short-term debt on an original maturity basis represents only a small percentage of total obligations. The majority of debt comes from foreign banks, with market bond financing accounting for about a quarter of long-term debt.

Chile’s External Debt Climbs to 76.4% of GDP as Private Sector Risk Grows. (Photo Internet reproduction)

Private sector entities, particularly foreign-owned companies, hold over 80% of external debt. These companies face growing currency risks as most long-term debt uses floating interest rates.

Chile’s Debt Structure and Fiscal Outlook

This structure makes debt servicing vulnerable to global interest rate fluctuations. Economic experts warn about several concerning implications. The rising debt levels increase debt service costs and put upward pressure on interest rates.

Private investment faces discouragement, and the Chilean peso continues to experience depreciation pressures. Chile’s central government aims to reduce its fiscal deficit, projected at 1.9% of GDP in 2024.

The 2025 budget envisions a notable deficit reduction moving toward a balanced fiscal position by 2027. Public debt currently stands at 41.6% of GDP as of March 2024.

Economists note foreign direct investment, while a good source of financing, has stagnated in terms of its weight in the aggregate external debt. Chile currently maintains its credit ratings at A2/A-/A from major rating agencies. Future sustainability depends on global economic conditions, domestic growth, and effective policy decisions.