Gross reserves drop to lowest level in nearly seven years

THE country’s gross international reserves (GIR) continued to decline to the lowest level in about seven years, as the central bank still intervened in the foreign exchange market amid a depreciating peso.
The Bangko Sentral ng Pilipinas (BSP) reported on Friday, July 6, that the GIR declined 1.92% to $77.675 billion in June, from the $79.202 billion recorded in May, and 4.48% lower than the $81.321 billion logged in June 2017.
This was the lowest level since the $75.302 billion GIR recorded in December 2011.
“The month-on-month decline in the GIR level was due mainly to outflows arising from the foreign exchange operations of the BSP, revaluation adjustments on the BSP’s gold holdings resulting from the decrease in the price of gold in the international market, and payments made by the National Government (NG) for its maturing foreign exchange obligations,” the BSP said in a statement.
The central bank sometimes intervenes in the foreign exchange market to temper sharp swings during the daily peso-dollar trading sessions.
“These were partially tempered by the NG’s net foreign currency deposits as well
as the BSP’s income from its investments abroad,” the BSP added.
The central bank also said reserves can cover up to six times the country’s short-term external debt and 4.1 times when computed on residual terms.
International reserves — which stands as buffers against external financial shocks — are composed of gold, the BSP’s assets expressed in foreign currencies, country quotas with the IMF, and foreign currency deposits held by government and state-run firms. — Elijah Joseph C. Tubayan