Due to higher financing needs of the government and non-financial firms, the Philippine economy’s net foreign liabilities expanded to ₱3.7 trillion in the second quarter of 2025, according to the Bangko Sentral ng Pilipinas (BSP).

The latest preliminary balance sheet approach (BSA) data released by the BSP last Monday, Dec. 29, showed that the economy’s liabilities abroad rose by 7.1 percent from ₱3.5 trillion in the first quarter of 2025, which the BSP said was driven by elevated financing needs of non-financial firms and the general government (GG).

Non-financial firms increased their foreign borrowings through loans, equity, and investment fund shares held by foreign investors. Their net debtor position widened as obligations to foreign sources expanded faster than their foreign assets.

Nearly three-fourths of these firms’ liabilities came from banks, with the remainder sourced from the rest of the world.

Likewise, the government’s net debtor position widened as government debt securities held by banks, nonresidents, and other financial firms increased. This was compounded by higher loans owed to nonresidents.

Meanwhile, the BSP’s holdings of foreign debt securities declined, prompting a drop in the country’s foreign assets.

The BSP noted that 70.1 percent of government obligations are peso-denominated, limiting exposure to sharp exchange rate swings.

An increase in net external liabilities signals heavier reliance on foreign funding. While this supports the country’s financing needs, it also heightens exposure to global risks, including elevated borrowing costs and sudden capital flow reversals.

BSA allows policymakers to identify sector-level weaknesses and financial stability risks that may not be captured in flow-based data.