THE country’s dollar reserves declined to its lowest in seven months in end-April, the Bangko Sentral ng Pilipinas (BSP) said.
Data showed that the country’s gross international reserves (GIR) level settled to $106.76 billion as of end-April this year from the end-March level of $107.31 billion.
It is also lower than the $107.705-billion GIR level in the same period last year.
The country’s April GIR is the lowest it has been since September last year, when the country’s dollar defenses hit $106.596 billion.
The country’s GIR is the level of foreign exchange holdings being managed by the Central Bank during a given period. The GIR is a crucial component of the economy as it is often used to manage the country’s foreign exchange rate against excess volatility.
According to the statement of the Central Bank, the latest GIR level “represents a more than adequate” external liquidity buffer equivalent to 9.4 months’ worth of imports of goods and payments of services and primary income.
It is also about 7 times the country’s short-term external debt based on original maturity and 5.5 times based on residual maturity.
Factors for decline
The BSP attributed the month-on-month decrease in the country’s GIR level mainly to the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP, as the NG settled its foreign currency debt obligations and paid for various expenditures. The BSP also said the downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market affected the country’s level of reserves.
Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said he believes the country’s dollar defenses will rise and contribute to the country’s external position in the coming months.
“For the coming months, the country’s GIR could still increase and potentially post new record highs amid the continued growth in the country’s structural inflows from OFW remittances, BPO revenues, foreign tourism as well as foreign invetstment/FDI inflows,” Ricafort said.
“Thus, near record high GIR and prospects of reaching new record highs in the coming months could further strengthen the country’s external position, which is a key pillar for the country’s continued favorable credit ratings for the second straight year,” he added.