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Philippines’ FX reserves slip in July

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THE COUNTRY’s foreign exchange reserves dipped to a fresh six-year low in July as the Bangko Sentral ng Pilipinas (BSP) tapped the pool of funds to defend the local currency.

Gross international reserves (GIR) dropped for the fourth straight month to $76.892 billion from June’s $77.525 billion and from $81.065 billion a year ago.

This is the lowest reserve level seen since June 2012’s $76.13 billion.

GIR decline persisted as the government paid its outstanding foreign debts, coupled with downward adjustments in international gold prices, the BSP said in a statement sent late on Tuesday.

The value of the BSP’s gold holdings slipped to $7.788 billion last month from $7.913 billion in June and from $8.003 billion a year ago.

The central bank also used the reserves to temper sharp exchange rate swings at a time the peso kept trading weaker than P53 to the dollar. The local currency averaged P53.4329 against the greenback in July, marking a fresh 12-year low.

As a result, income from foreign investments dropped to $60.831 billion in July from $62.356 billion the preceding month.

On the other hand, the value of the BSP’s foreign currency holdings went up to $6.59 billion from $5.573 billion in June, as the result of a weaker peso. Bigger net foreign currency deposits plus a steady stream of income from the BSP’s offshore investments partly offset the outflows, the central bank said.

Meanwhile, reserves parked with the International Monetary Fund (IMF) inched lower to $488.5 million from $489.3 million previously, while the Philippines’ special drawing rights — the amount that can be tapped in the IMF’s reserve currency basket — steadied at $1.195 billion.

The current GIR level settled below the $80-billion forecast by the central bank for the entire 2018 and is lower than the $81.57-billion reserves held at end-2017.

July reserves can cover 7.4 months’ worth of imports, providing an “adequate” buffer for the economy at a time of heavy importation of raw materials and capital goods as the economy expands. The import cover ratio is well above the three-month global standard.

They were also equivalent to 6.1 times the country’s short-term external debt of up to one year and 4.1 times based on “residual maturity”, or outstanding external debt with original maturity of up to a year, plus principal payments on medium- and long-term loans of the public and private sectors falling due in the next 12 months.

In a speech before the Senate Committee on Finance on Tuesday, BSP Governor Nestor A. Espenilla, Jr. said the country’s GIR remains “sufficient to help shield the economy and financial markets against global market volatilities.”

Fitch Ratings also cited the ample reserves as a source of optimism for the Philippines’ credit score, which it kept at “BBB” with a “stable” outlook last month. — Melissa Luz T. Lopez