Philippine external debt rises 1.5% in Q2 2025

By Francis Allan L. Angelo

The Philippines’ external debt increased moderately in the second quarter of 2025, mainly due to the weakening of the US dollar.

Outstanding external debt reached USD 148.87 billion as of end-June 2025, up 1.5 percent from the previous quarter.

In a media release, the Bangko Sentral ng Pilipinas (BSP) said the increase was primarily due to valuation effects from the depreciation of the US dollar, which raised the dollar-equivalent of borrowings in other currencies by USD 1.49 billion.

The net acquisition of Philippine debt securities worth USD 660.96 million also contributed to the increase, while net repayments of USD 315.67 million partly offset the rise.

The country’s external debt stock was equivalent to 31.2 percent of gross domestic product, an improvement from 31.5 percent in the previous quarter.

Authorities noted that the external debt position remained manageable and sustainable based on key metrics.

Short-term external debt under the remaining maturity concept stood at USD 28.63 billion, which was well-covered by gross international reserves of USD 106.00 billion.

This reserve level provided 3.7 times cover for short-term obligations, keeping the country’s GIR-to-short-term debt ratio in line with peer emerging economies.

The debt service ratio, which measures principal and interest payments against export earnings and other inflows, improved to 8.7 percent from 9.8 percent a year earlier.

The improvement was attributed to lower debt service payments by resident borrowers during the second quarter of 2025.

On a year-on-year basis, external debt rose 14.4 percent, driven by USD 5.83 billion in bond issuances by the national government and USD 3.44 billion in external financing tapped by local banks.

WHY IT MATTERS

Changes in external debt affect the country’s ability to borrow and manage its finances, which can influence government spending, public services, and future taxes.

A stable debt level helps keep inflation and interest rates in check, protecting household purchasing power and borrowing costs for ordinary Filipinos.

When debt grows too quickly, however, it can pressure the peso, raise the cost of imports, and make everyday goods more expensive.