Philippines payments position posts $642-million surplus in July

The Philippines’ payments position saw a surplus in July as the government increased its foreign currency deposits to the central bank, the Bangko Sentral ng Pilipinas (BSP) reported Wednesday.

Data released by the BSP showed that the country’s balance of payments (BOP) posted a surplus of $642 million in July, higher than the $8-million surplus recorded in the same month in 2020.

The BOP consists of Philippine transactions with the rest of the world during a specific period. A surplus means more funds entered the country, while a deficit means more funds exited.

“The BOP surplus in July 2021 reflected mainly the national government's net foreign currency deposits with the BSP and the BSP’s income from its investments abroad,” the central bank said.

In particular, the central bank said the national government issued Global Bonds in July 2021 and deposited the proceeds of $2.975 billion with the BSP.

“These were partly offset, however, by the NG’s payments of its foreign currency debt obligations and the BSP’s net foreign exchange operations,” the BSP said.

The BOP surplus in July reduced the cumulative BOP deficit in January-July 2021 to $1.3 billion from a deficit of $1.94 billion in the first six months of the year.

The current year-to-date BOP level is a reversal from the $4.12 billion surplus recorded in the same period a year ago.

Based on preliminary data, this cumulative BOP deficit was partly attributed to a wider merchandise trade deficit, according to the BSP.

Based on the Philippine Statistics Authority’s (PSA) International Merchandise Trade Statistics, the trade balance for January to June 2021 reached a gap of $17.44 billion, up from the $11.37-billion deficit posted in the same period last year.

Nonetheless, the BOP position reflects an increase in the final gross international reserves (GIR) level to $107.15 billion as of end-July 2021 from $105.76 billion as of end-June 2021.

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.

“Specifically, it ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the BSP said.

Moreover, it is also about 7.7 times the country’s short-term external debt based on original maturity and 5.2 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. — BM, GMA News