MANILA, Philippines -- The Philippines' foreign debt rose 0.9 percent to $54.9 billion at the end of 2007 from $54.4 billion at the end of September, the central bank said on Monday.

Despite the increase, the country's foreign debt as a percentage of gross domestic product, improved to 38.1 percent at the end of December from 40.3 percent at the end of September and 45.4 percent at the end of 2006, it said in a statement.

The Philippine government, which relies heavily on borrowings to help fund its budget deficit, wants to lessen its dependence on foreign debt this year by tapping the domestic market for most of its debt requirements.

It aims to balance its budget this year for the first time in more than a decade.

The public sector accounted for 68.6 percent or $37.7 billion of the total foreign debt at the end of 2007 and the private sector for the balance, the central bank said. More than half of the country's stock of external debt at the end of the year was in US dollars, and about a quarter in Japanese yen.

The country's debt service ratio, which includes principal and interest payments on foreign loans, was at 9.6 percent of total exports of goods and services in 2007, lower than the year earlier 11.8 percent.

This debt-service ratio, which reflects the country's ability to service foreign debt using foreign exchange earnings, has remained well below the 20-25 percent international benchmark, the statement said.

($1=P41.75) (Reporting by Raju Gopalakrishnan; Editing by Jacqueline Wong)