Philippines foreign debt servicing rises as maturing loans lift repayments

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Philippines foreign debt servicing rise

Highlights

Philippines' external debt service burden rises 5.19% to $8.249 billion in January–July due to principal repayments increasing 12.88%.
Higher U.S. and global interest rates and a weaker peso—averaging P61.5963 per dollar in July—are raising external debt servicing costs.
Philippines' external debt stock hits a record $154.932 billion at end-June, up 4.07% year-on-year, with the public sector holding $98.535 billion.

Debt repayment pressures build by July

As reported by BusinessWorld, citing Bangko Sentral ng Pilipinas, the country’s external debt service burden stands at $8.249 billion in the seven months to July, up 5.19% from $7.842 billion a year earlier. The increase is driven mainly by principal payments, which rise 12.88% to $3.576 billion from $3.168 billion in the same period last year, while interest payments edge down 0.04% to $4.673 billion from $4.675 billion.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., says debt servicing on foreign borrowings continues to rise as loans incurred since the pandemic mature. He adds that higher U.S., global and local interest rates in recent years, especially in 2026, also contribute to the increase in external debt servicing costs.

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., says the peso’s weakness, driven by the strong dollar and global volatility, also means it costs more to service external debt. BSP data show the peso averages P61.5963 against the dollar in July, weaker than P56.7523 a year earlier.

External debt burden and broader exposure

The debt service burden represents principal and interest payments after rescheduling, according to the central bank. These include payments on fixed medium- and long-term credits, including International Monetary Fund credits and New Money Facilities, as well as interest payments on fixed and revolving short-term liabilities of banks and nonbanks.

The data exclude prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and nonbanks. Based on the latest figures, the external debt service burden accounts for 3% of gross domestic product in the second quarter, the same share as a year earlier but lower than 3.4% in the first quarter.

The Philippines’ external debt stock rises 4.07% to a record $154.932 billion as of end-June from $148.873 billion a year earlier. Of the total, $98.535 billion comes from the public sector and $56.397 billion from the private sector, with the BSP compiling the data from reports submitted by borrowers, banks and major foreign creditors.

This adds to earlier discussion around sovereign ratings pressure as geopolitical shocks and elevated fiscal spending raise funding risks.

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