The Philippines’ outstanding external debt fell to a one-year low at the end of March as international lenders pulled back amid tighter global financing conditions and shifting investor sentiment.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that total foreign obligations decreased by $300 million, or 0.2 percent, to $147.35 billion from $147.65 billion at the end of December 2025—the lowest level since the first quarter of 2025.

The central bank attributed the quarter-on-quarter decline to lower non-resident holdings of Philippine debt securities, noting that cautious investor sentiment and restrictive financing conditions across emerging markets dampened credit demand during the period.

On a year-on-year basis, the debt stock grew modestly from the $146.74 billion recorded in the first quarter of 2025, a level the central bank characterized as manageable.

The drop in external debt occurred as the domestic economy faced headwinds. Gross domestic product (GDP) growth slowed to a five-year low of 2.8 percent during the first quarter, under pressure from a persistent economic slowdown that began in 2025 following a controversial domestic flood-control dispute that weakened business confidence.

Despite slower economic growth, the central bank said key debt sustainability indicators remained sound. The country's external debt-to-GDP ratio improved to 30 percent in the first quarter, down from 30.3 percent in the final three months of 2025.

By borrower type, the public sector increased its debt stock to $95.66 billion in the first quarter from $94.87 billion in the previous quarter. This expansion was offset by the private sector, whose debt fell to $51.70 billion from $52.78 billion at the end of December 2025.

Bondholders and noteholders continued to hold the largest share of the country’s foreign obligations, though their holdings decreased to $47.53 billion from $48.95 billion in the prior quarter.

Conversely, debt to multilateral lenders rose to $42.63 billion from $41.39 billion, driven by increased funding from the Asian Development Bank (ADB) at $18.86 billion and the World Bank’s International Bank for Reconstruction and Development (IBRD) at $16.23 billion.

Among bilateral partners, debt to Japan declined to $16.27 billion from $16.58 billion in the fourth quarter of 2025. Obligations to China also eased to $4.55 billion from $4.90 billion, while debt to the United States (US) rose slightly to $2.48 billion from $2.33 billion.

“Overall, the external debt profile remains resilient, with developments primarily reflecting market-driven adjustments and financing requirements,” the BSP said.

Liquidity buffers also shifted during the period. The country’s short-term foreign debt, measured by remaining maturity (STRM), dropped to $25.50 billion from $26.80 billion in the previous quarter. This amount remains amply covered by gross international reserves (GIR) of $106.64 billion, representing a reserve adequacy ratio of 4.18 times STRM—an improvement from the 4.13 ratio seen in December 2025.

Finally, the debt service ratio, which measures principal and interest payments against foreign exchange earnings, climbed to 9.5 percent from 8.3 percent in the previous quarter. The BSP noted that this indicator "likewise remained moderate," as the increase was driven solely by higher principal payments.