External debt — obligations owed by Philippine residents to non-residents — grew by 6.8 percent year-on-year, reaching $149.09 billion as of end-September 2025, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, 12 December. This covers all foreign borrowings of the national government, government-owned and -controlled corporations (GOCCs), private firms, banks, and individual Filipino residents.

The increase was driven mainly by new borrowings, including $3.33 billion in national government bond issuances and $1.58 billion in external financing secured by local banks, the BSP said.

The central bank noted that outstanding external debt “remained broadly stable” in the third quarter, rising only 0.1 percent from the previous quarter. This slight uptick was attributed to the net acquisition of Philippine debt securities by non-residents amounting to $1.47 billion.

The current external debt level is equivalent to 30.9 percent of GDP, slightly lower than the 31.2 percent recorded in the previous quarter.

According to the BSP, indicators show the country’s external obligations remain manageable, supported by solid economic fundamentals and policy measures.

As of end-September 2025, short-term external debt based on remaining maturity (STRM) stood at $27.16 billion. This is well-covered by the Philippines’ gross international reserves (GIR) of $109.06 billion, providing 4.01 times cover for short-term liabilities. This improves on the 3.85 GIR-to-STRM ratio posted at end-June 2025 and compares favorably with many emerging-market peers.

The debt service ratio (DSR) — which measures the economy’s ability to service foreign debt by comparing loan payments with export earnings and other foreign inflows — improved to 8.5 percent, down from 11.5 percent a year earlier. The BSP attributed this to lower principal and interest payments by resident borrowers.

The Bureau of the Treasury (BTr) reported that external debt accounted for 31.4 percent of all Philippine obligations as of end-September 2025. The agency noted that the government maintains a preference for domestic borrowing “consistent with the government’s policy of reducing foreign exchange risk while deepening domestic capital market development.”

Higher external debt increases exposure to exchange rate volatility and global interest rate shifts. Because much of the country’s foreign borrowing is dollar-denominated, a weaker peso raises repayment costs, placing pressure on the national budget and contributing to higher prices for fuel, food inputs, and other imports. The peso has been volatile in recent months, hitting record lows in both November and December.

Rising external debt can also affect inflation, which remains below the BSP’s 2–4 percent target range, leaving policymakers some room to accommodate additional foreign obligations.

More government funds directed toward debt servicing means fewer resources for social programs, infrastructure, and subsidies. This can slow job creation and may eventually require higher taxes.

While external borrowing can support development, such as post-pandemic recovery and infrastructure spending, elevated global interest rates raise borrowing costs. If economic growth does not keep pace, the burden falls on Filipinos through higher prices, tighter household budgets, and fewer public services.