THE PHILIPPINES’ gross international reserves (GIR) dipped by 0.3% month on month in June, which the Bangko Sentral ng Pilipinas (BSP) governor partly attributed to its intervention in the foreign exchange market amid the peso’s continued depreciation against the US dollar.
Preliminary data from the BSP showed gross dollar reserves settled at $104.7 billion at end-June, slightly lower than $105.02 billion at end-May.
Year on year, dollar reserves rose by 5.3% from $99.39 billion.
“The month-on-month decline in the GIR level reflected mainly the National Government’s (NG) payments of its foreign currency debt obligations and downward valuation adjustments in the BSP gold holdings due to the decrease in the price of gold in the international market,” the central bank said.
BSP Governor Eli M. Remolona, Jr. said that the decrease in the end-June GIR level was partly due to the central bank’s intervention in the foreign exchange market as the peso continued to weaken against the US dollar.
“It’s not all of it, but some of it,” he told reporters late on Friday. “As I said before, we don’t want the peso to depreciate very sharply. We don’t have a target level for the peso. We just don’t want it to depreciate sharply.”
The peso depreciated to P58.61 against the dollar as of end-June from P58.51 as of end-May. The local unit has been trading at the P58-per-dollar since May.
As of end-June, the level of dollar reserves was enough to cover about 6.1 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.
It was also equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.
Ample foreign exchange buffers protect an economy from market volatility and ensure the country can pay its debts in the event of an economic downturn.
Broken down, the central bank’s foreign investments slipped by 0.04% to $89.49 billion at end-June from $89.52 billion in the previous month. On the other hand, investments increased by 7% year on year from $83.66 billion.
Reserves in the form of gold were valued at $9.9 billion, lower by 1.1% from $10.02 billion as of end-May and down by 1% from $10.01 billion a year ago.
Net foreign currency deposits declined by 17.8% to $790.6 million as of end-June from $962.3 million a month earlier. It likewise fell by 31.9% from $1.16 billion as of end-June in 2023.
Net international reserves slipped by 0.3% to $104.69 billion at end-June from $104.98 billion at end-May.
Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).
Meanwhile, the country’s reserve position in the IMF edged up by 0.4% to $740.4 million at end-June from $737.2 million at end-May.
Special drawing rights, or the amount the country can tap from the IMF, was unchanged at $3.77 billion.
“The BSP has previously (said) that the agency is actively but not openly intervening in the market not only to stabilize the value of the Philippine currency but also to stem the inflation that is associated with the depreciation,” Leonardo A. Lanzona, Jr., an economics professor at the Ateneo de Manila University said in an e-mail.
Mr. Lanzona said the problem with this intervention is that it leads to greater dependency on imports.
“These can also lead to short-term speculative investments instead of long-term investments that can improve domestic productive capacity,” he added.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that despite the month-on-month decline, the GIR level has stayed above the $100-billion mark for a ninth straight month, which is a “good signal.”
“For the coming months, the country’s GIR could still be supported by the continued growth in the country’s structural inflows from overseas Filipino worker remittances, business process outsourcing revenues, exports (though offset by imports), relatively fast recovery in foreign tourism revenues, as well as continued foreign investment/FDI inflows coming from among pre-pandemic highs,” he added.
The BSP expects the GIR level to settle at $104 billion by yearend. — Luisa Maria Jacinta C. Jocson
