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Foreign reserves down to $106.98B as of end-May —BSP

The Philippines’ foreign reserves declined to $106.98 billion as of end-May this year as the national government withdrew its deposits in the central bank to pay for its foreign currency-denominated obligations, the Bangko Sentral ng Pilipinas (BSP) said Friday.

Based on central bank data, the country’s gross international reserves (GIR) level —a measure of a country's ability to settle import payments and service foreign debt— at end-May is lower compared to end-April’s level of $107.71 billion.

“The month-on-month decrease in the GIR level reflected outflows mainly from the foreign currency withdrawals of the national government (NG) from its deposits with the BSP to pay its foreign currency debt obligations and various expenditures,” the BSP said.

“These outflows were partly offset, however, by the inflows from the BSP’s foreign exchange operations and income from its investments abroad, and an upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market,” it said.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the end-May GIR level is still near the record-high of $110.1 billion posted in December 2020, or just a little over $3 billion away.

“Thus, new record-high GIR is possible in the coming months amid narrower trade deficit/net imports; continued inflows of OFW remittances, BPO revenues, foreign direct investments (FDIs),” Ricafort said.

The BSP said the latest GIR level represents a more than adequate external liquidity buffer equivalent to 12.2 months’ worth of imports of goods and payments of services and primary income.

By convention, GIR is viewed to be adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income, according to the central bank.

Moreover, the GIR level is also about 7.4 times the country’s short-term external debt based on original maturity and 5.1 times based on residual maturity.

Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

The level of GIR, as of a particular period, is considered adequate, if it provides at least 100% cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period, the BSP noted.

Likewise, the net international reserves (NIR), which refers to the difference between the BSP’s GIR and total short-term liabilities, decreased by $730 million to $106.96 billion as of end-May from the end-April 2021 level of $107.69 billion.—AOL, GMA News