DOLLAR reserves slipped to a fresh seven-year low in October as the central bank defended the peso and as the government paid down maturing foreign debt.
Gross international reserves (GIR) dropped to $74.773 billion last month, less than the $74.939 billion in September and down from the $80.419 billion booked a year earlier, the Bangko Sentral ng Pilipinas (BSP) said.
This is the lowest reserve level seen since July 2011, when the indicator fell to $71.884 billion.
In a statement, the central bank said the lower GIR is due to higher dollar outflows following payments made by the national government for foreign currency debt, as well as net withdrawals.
The central bank also dipped into reserves to temper sharp swings in the exchange rate as the peso continued to trade weaker than the P54 level against the dollar during the first few weeks of October.
The peso averaged P54.0086 during the month, weaker against the September average of P53.9419.
The BSP has been pursuing a policy of “tactical intervention” in managing currency swings, as it holds the view that the exchange rate should be generally market-determined but also be subject to regulatory intervention to control abrupt or steep changes in the day-to-day rate.
Foreign currency holdings also slipped to $5.432 billion from $5.842 billion a month earlier.
On the other hand, these declines were partly offset by higher gold valuations. The value of the BSP’s gold holdings rose to $7.854 billion last month, against $7.577 billion in September and down from $8.065 billion a year earlier.
A steady stream of income from the central bank’s foreign investments likewise propped up GIR. Total investments were valued at $59.819 billion, lower than the month-earlier $59.851 billion.
Reserves held with the International Monetary Fund (IMF) fell to $481.6 million from $483.4 million previously. On the other hand, the Philippines’ special drawing rights — or the amount which can be tapped under the IMF’s reserve currency basket — were unchanged at $1.186 billion.
The current GIR level remained below the $80-billion forecast for the entire year, and is also lower than the $81.57 billion reserves held in December 2017.
Despite the decline, the October GIR is sufficient for 6.8 months’ worth of imports, matching the September import coverage rate. This comes at a time of heavy importation of raw materials and capital goods.
The BSP said reserves represent an “ample” external liquidity buffer, well above the three-month global standard.
International reserves are made up of gold, the BSP’s assets expressed in foreign currency, country quotas with the IMF, and foreign currency deposits held by government and state-run firms. — Melissa Luz T. Lopez