Philippines’ foreign reserves fall to 4-month low in June

The Philippines’ foreign currency reserves fell to a four-month low in June due to the national government’s withdrawal of its foreign currency deposits to settle its debt obligations.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the country’s gross international reserves (GIR) — an indicator of ability to settle import payments and service foreign debt— amounted to $99.8 billion in June, down from $100.6 billion GIR level in May.

This is the lowest GIR level in four months since February when the reserves level hit $98.216 billion.

The central bank keeps the country’s reserve assets —consisting of foreign investments, gold, foreign exchange, reserve position in the International Monetary Fund, and special drawing rights.

“The month-on-month decrease in the GIR level reflected mainly the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and downward adjustments in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said.

Nonetheless, the latest GIR level represents 7.4 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.

“Moreover, it is also about 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity,” the BSP said.

Short-term debt based on residual maturity refers to outstanding external debt with an 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 12-month period.

Meanwhile, net international reserves — the difference between the GIR and reserve liabilities or short-term foreign debt and credit and loans from the IMF — fell to $99.8 billion from $100.6 billion in May. —VAL, GMA Integrated News