United States one-dollar bills are seen in this Nov. 14, 2014 file photo — REUTERS

THE PHILIPPINES’ dollar reserves dipped as of end-August, as the National Government (NG) paid some of its foreign debt obligations and the value of the central bank’s gold holdings fell.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed gross international reserves (GIR) slipped by 0.14% to $99.81 billion as of end-August from $99.95 billion as of end-July.

This was the lowest dollar reserve level since the $99.39 billion seen in June.

However, the GIR was 2.4% higher than $97.44 billion as of end-August 2022.

“The month-on-month decrease in the GIR level reflected mainly the NG’s payments of its foreign currency debt obligations and the downward adjustments in the value of BSP’s gold holdings due to the decrease in the price of gold in the international market,” the central bank said. 

As of end-August, the dollar reserves were enough to cover 5.9 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

It is also equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

Ample foreign exchange buffers protect the country from market volatility and serve as a guarantee for the economy’s ability to pay its debts in the event of an economic downturn.

“The slight decrease in the GIR in August 2023 was due to a number of factors, including the payment of maturing foreign currency obligations, some ‘hot money’ outflows, and the decline in the value of the Philippine peso against the US dollar, among others,” Security Bank Corp. Chief Economist Robert Dan J. Roces said.   

Based on BSP data, foreign currency deposits fell by 52.5% to $648 million at end-August from $1.367 billion a month earlier and by 63.5% from $1.777 billion a year ago.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the decrease in foreign currency holdings “partly due to some foreign exchange operations (possible foreign exchange intervention activities, as an option signaled by local monetary authorities during the month).”

The peso closed at P56.595 on Aug. 31, depreciating by 3% or P1.715 from the P54.88 finish on July 31.

Meanwhile, buffers in the form of gold were valued at $10.23 billion as of end-August, slipping by 0.7% from $10.3 billion as of end-July. However, it was up by 19.9% from $8.53 billion a year earlier.

The decline in foreign currency deposits and gold buffers were offset by an increase in foreign investments, Mr. Ricafort said.

The BSP’s foreign investments rose by 0.7% to $84.33 billion as of end-August from $83.68 billion a month earlier. This was also 1.9% higher than $82.73 billion a year earlier.

According to the BSP, net international reserves slipped by 0.1% to $99.8 billion as of end-August from $99.9 billion from end-July.

Net international reserves are the difference between the BSP’s reserve assets (GIR) and reserve liabilities such as short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).

The Philippines’ reserve position in the IMF also declined by 1.4% to $790.4 million from $801.9 million in July but rose by 6.7% from $740.8 million as of end-August 2022.

Special drawing rights (SDRs) — the amount the country can tap from the IMF — inched up by 0.5% to $3.81 billion as of end-August from $3.79 billion in the month prior. This was 4% higher than $3.66 billion a year earlier.

China Banking Corp. Chief Economist Domini S. Velasquez said the country’s GIR as of end-August remains sufficient in terms of its imports and external debt cover.

“We think there is a risk that the GIR will fall in September due to the depreciation pressure on the peso. Moreover, we will likely see higher imports as oil prices continue to climb. This will squeeze the import cover ratio of the GIR,” she said.

The local currency closed at P56.79 versus the dollar on Thursday, strengthening by 15 centavos from its previous finish of P56.94, data from the Bankers Association of the Philippines’ website showed.

Year to date, the peso depreciated by 1.8% or P1.035 from its P55.755 finish on Dec. 29, 2022.

Meanwhile, Mr. Roces said the slight decrease in August GIR is not a “cause for alarm.”

“The outlook for the country’s dollar reserves in the coming months is positive with remittances from BPOs (business process outsourcing) and OFWs (overseas Filipino workers) incoming,” Mr. Roces said.

The BSP is expecting to end the year with $100 billion in dollar reserves and $102 billion by end-2024. — Keisha B. Ta-asan

Neil Banzuelo