Government foreign borrowings rise to USD 4.89 billion

The Bangko Sentral ng Pilipinas (BSP) approved USD 4.89 billion (about PHP287 billion) in proposed foreign borrowings by the Philippine public sector in the second quarter of 2025, marking a 25.4% increase from the USD 3.90 billion approved in the same period last year.

The central bank said all the approved loans are medium- to long-term and are intended to finance critical infrastructure, health, and climate resilience projects across the country.

The total includes eight project loans worth USD 4.14 billion and three program loans amounting to USD 750 million.

According to the BSP, the loans will fund government initiatives in road and rail transport, flood control, civil service modernization, climate resilience, and health service expansion.

For the first half of 2025, BSP-approved public sector foreign borrowings totaled USD 11.18 billion, compared to the full-year total of USD 13.68 billion in 2024.

Under Section 20, Article VII of the 1987 Constitution and Letter of Instructions No. 158, all proposed foreign loans by the national government, its agencies, and government-owned financial institutions require prior approval from the BSP’s Monetary Board.

This oversight is part of the central bank’s legal mandate to ensure that foreign debt remains within sustainable levels and that repayments align with the country’s debt-servicing capacity.

“Foreign borrowings, while necessary to fund national development, must be planned and managed carefully to avoid undue pressure on our external position and fiscal sustainability,” the BSP noted.

The approval of new loans comes as the country continues to expand its infrastructure program under the Marcos administration’s “Build Better More” initiative, while also addressing climate risks and public health challenges.

Foreign loans, especially those with long-term maturities and concessional terms, are considered crucial for financing capital-intensive infrastructure projects without causing short-term fiscal strain.

However, they must be weighed against potential risks such as foreign exchange fluctuations, rising global interest rates, and external economic shocks that could affect debt repayments.

To support long-term debt sustainability, the BSP reminded all resident entities—both public and private—to submit their Foreign Borrowings Plan (FBP) for the fourth quarter of 2025 and full year 2026 by September 30, 2025.

The FBP requirement, as outlined under Section 22 of the BSP’s Manual of Regulations on Foreign Exchange Transactions (FX Manual), applies to all residents seeking to secure medium- or long-term foreign loans or issue foreign currency-denominated instruments.

“This process allows the BSP to assess the economy’s foreign funding requirements and align these with our external debt management policies,” the central bank said.

Submission of these plans helps BSP monitor and regulate the inflow of foreign currency borrowings to ensure that they do not exceed the country’s ability to repay.

Entities may submit their FBPs to the BSP’s International Operations Department through designated email addresses or via an online form, with all data covered under strict confidentiality provisions in line with Republic Act No. 7653, as amended by RA No. 11211.

The increase in foreign borrowings signals the government’s proactive approach to financing key national priorities amid a complex global economic environment.

Analysts note that while foreign loans can be an efficient financing tool, effective project implementation and transparent use of funds remain essential to ensure long-term benefits outweigh future repayment burdens.

Foreign borrowings help finance essential development projects when domestic funds are insufficient, but they must be managed responsibly to avoid excessive debt.

The BSP’s role in reviewing and approving these loans ensures that borrowing remains sustainable and aligned with the country’s broader financial and economic stability goals.