The Philippine external debt service burden (DSB) declined by more than a fifth to $11.02 billion as of end-October 2025, from $14.3 billion in the same period in 2024, due to declines in both principal and interest payments.

The latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the 22.9-percent drop in the country’s servicing of its foreign debt was driven by a massive decline in principal payments and a single-digit decrease in interest payments (IPs).

Amortization plunged by 41.1 percent to $4.51 billion as of end-October, from $7.65 billion in the same period in 2024. IPs also eased by 2.1 percent to $6.51 billion during the period, from $6.65 billion a year earlier.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the country’s easing foreign DSB was “largely due to lower foreign debt maturities, as well as the reduced share of foreign borrowings in the national government’s (NG) borrowing mix in recent years to better manage the foreign exchange (forex) risks entailed in foreign borrowings.”

Annually, the NG aims to source 80 percent of its debt locally and 20 percent from external lenders.

Ricafort added that the United States Federal Reserve’s (US Fed) 175 basis points (bps) worth of cuts in America’s key interest rate also helped trim the country’s IPs on its foreign obligations.

As of end-September 2025, the Philippines’ foreign debt increased by 6.8 percent to $149.09 billion from $139.64 billion in the same period in 2024. Government debt accounted for $96.3 billion, or nearly two-thirds of the total, while the private sector accounted for over a third at $52.8 billion.

Foreign borrowings were equivalent to 27 percent of the country’s gross national income (GNI) as of end-September, slightly easing from 27.1 percent in the same period in 2024. Meanwhile, it rose to 30.9 percent of gross domestic product (GDP) as of end-September, from 30.6 percent a year earlier.

GNI measures the total income generated by a country’s residents, both domestically and abroad, making it a broader indicator of economic performance than GDP, which only accounts for local output.

By end-October 2025, the country’s external DSB dropped to 2.5 percent of GNI from 3.4 percent a year earlier. It also eased by one percentage point (ppt) to 2.9 percent of GDP from 3.9 percent in 2024.

According to the BSP, the foreign debt service burden represents principal and interest payments after rescheduling.

This covers payments on medium- to long-term loans, including those from the Washington-based multilateral lender International Monetary Fund (IMF), Paris Club agreements, commercial bank restructurings, and new money facilities.

It also includes IPs on fixed and revolving short-term liabilities of banks and nonbanks.

However, it excludes prepayments on future maturities of foreign loans and principal payments on short-term bank and nonbank obligations.

Looking ahead, Ricafort expects the risk of forex losses to keep the government cautious about bloating its foreign debt to fund the fiscal deficit, which is expected to be equivalent to 5.5 percent of GDP.

“Continued budget deficits would lead to higher programmed foreign commercial borrowings of the NG, as signaled a few weeks ago,” Ricafort said.