GROSS international reserves (GIR) slid in April as lower gold valuations and the central bank’s intervention in the foreign exchange market drove the pile to a three-year low.
Dollar reserves dropped to $80.062 billion last month coming from $80.511 billion in March and the $82.015 billion level in April 2017, the Bangko Sentral ng Pilipinas (BSP) said yesterday. The stash is also the lowest level since December 2014’s $79.541 billion.
In a statement, the central bank said there was a decline in reserves as the government settled its foreign debt, coupled with the impact of lower gold prices in the international market.
As a result, the value of the central bank’s gold holdings slid to $8.251 billion from $8.375 billion in March, although better than the $7.933 billion recorded in April last year, data showed.
The BSP’s “tactical intervention” in the foreign exchange market also fed into the reserve stash, with the monetary authority using the funds to temper sharp swings during the daily peso-dollar trading sessions.
The central bank’s foreign currency holdings amounted to $5.372 billion, lower than the $5.542 billion tallied a month ago. This was after the peso returned to the P52 level against the greenback to average P52.0986 that month, coming from March’s P52.0676 level.
Offsetting these adjustments was the steady stream of income from the BSP’s offshore investments, as well as higher net foreign currency deposits held by the government.
Foreign investment gains reached $64.78 billion to account for the bulk of reserves, albeit lower compared to March’s $64.931 billion and the $68.88 billion tallied the previous year.
Meanwhile, reserves maintained under the International Monetary Fund (IMF) were trimmed to $424.7 million in April from $430.1 million a month ago. Special drawing rights, or the amount which the Philippines can tap under the IMF’s reserve currency basket, remained at $1.234 billion.
Although declining, the latest GIR level still meets the $80 billion expected by the BSP by yearend. If realized, this will be lower than the $81.57 billion stash in December 2017.
Despite the decline, the central bank said reserves can comfortably cover up to 5.5 times the country’s short-term external debt and 4.1 times when computed on residual terms.
“At this level, the GIR nonetheless serves as an ample external liquidity buffer and is equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income,” the BSP said. This ratio is well above the three-month international standard.
International reserves 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. These stand as buffers against external financial shocks and are considered by credit raters as a source of strength for the local economy.
One analyst previously flagged the need to build up the country’s reserves further in anticipation of increased demand for dollars. However, BSP Deputy Governor Diwa C. Guinigundo has said the current level remains “very comfortable,” adding that buying more dollars could exert additional inflation pressures. — Melissa Luz T. Lopez

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