THE COUNTRY’S balance of payment (BoP) position recorded a wider surplus of $642 million in July, mainly backed by foreign currency deposits and income from the central bank’s offshore investments.

This is significantly bigger than the $8-million surplus logged a year earlier, based on data released by the Bangko Sentral ng Pilipinas (BSP). It ended two months of the BoP position in deficit, and is a turnaround from the $312-million gap in June.

“The BoP surplus in July 2021 reflected mainly the National Government’s net foreign currency deposits with the BSP and the BSP’s net income from investments abroad,” the central bank said in a statement on Wednesday.

However, this was partially offset by the National Government’s foreign currency debt obligations worth $465 million and the central bank’s net foreign exchange operations valued at $398 million.

The bigger surplus was also due to the proceeds from the global bond sales of the National Government, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

The Philippines raised $3 billion (P146 billion) from dollar-denominated global bonds which were offered in 25-year and 10.5-year tranches. These bonds were issued on July 6.

The BoP gives a glimpse into the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.

At its end-July position, the BoP reflects the country’s gross international reserves of $107.15 billion, higher by 1.31% than the $105.76 billion as of end-June.

This level of foreign exchange buffers is enough to cover 12.2 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to about 7.7 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity. 

For the first seven months of 2021, the country’s BoP position stood at a deficit of $1.3 billion, a reversal from the $4.117-billion surplus a year ago.

“This cumulative BoP deficit was partly attributed to wider merchandise trade deficit,” it said.

The year-to-date BoP gap reflects muted demand for imports amid the ongoing pandemic, Asian Institute of Management economist John Paolo R. Rivera said in an e-mail.

Based on data from the Philippine Statistics Authority, the trade deficit in the first half of the year widened to $17.44 billion, 53.3% up from the $11.37-billion gap in the comparable period of 2020.

This year, the central bank expects the BoP to reach a $7.1-billion surplus.

Mr. Ricafort said the BoP position in the coming months will likely be supported by steady inflows of remittances and business process outsourcing revenues.

Cash remittances rose 7% to $2.638 billion in June from a year earlier. This helped drive the 6.4% rise in the first semester’s remittances $14.918 billion. The BSP expects cash remittances to grow by 4% in 2021 after a 0.8% decrease last year due to the pandemic. — Luz Wendy T. Noble