THE country’s gross international reserves (GIR) dropped to a 16-month low in May, the Bangko Sentral ng Pilipinas (BSP) said over the weekend.
Data showed the reserves plunged to $103.97 billion from $104.33 billion in April, due to the national government’s use of foreign currency deposits to pay external debt, the central bank explained.
Other factors were the “downward valuation adjustments in the BSP’s gold holdings due to decline in global gold prices and BSP’s net foreign exchange operations.” Yet the latest level “still provides a robust external liquidity buffer, equivalent to 6.9 months’ worth of imports of goods and payments of services and primary income.” It is also about 3.6 times the country’s short-term external debt based on residual maturity, the BSP said.
The GIR is not a cash savings account of the government. Its components include:
– Foreign investments, which comprise about 85 percent of reserves (foreign-issued securities and assets);
– Monetary gold, held as a foundational reserve asset;
– Foreign exchange or actual holdings of foreign currencies, mostly in US dollars;
– Reserve position in the International Monetary Fund (IMF), as required placements by the Philippines;
– Special Drawing Rights (SDRs) or supplementary foreign exchange reserve assets defined and maintained by the IMF.
The GIR level is considered adequate “if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.” It is also considered sufficient “if it provides at least 100-percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate 12-month period.” The BSP expects to end the year with the country’s reserves at $111 billion, and rising to $112 billion in 2027.
