By Luz Wendy T. Noble, Reporter 

The country’s gross international reserves (GIR) slipped in January as the government paid debt and the value of the central bank’s gold holdings declined. 

Dollar reserves slid by 0.3% to $108.45 billion at the end of last month from December, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday evening. These were also 0.2% lower than a year earlier. 

“The month-on-month decrease in the GIR level reflected mainly the National Government’s payments of its foreign currency debt obligations and downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the central bank said in a statement. 

Treasury bureau data showed that debt service payments tripled to P81.24 billion in November from a year earlier as amortization payments surged. Principal payments to foreign creditors reached P6.95 billion, while interest paid on external debt was P3.68 billion. 

The country’s debt service bill in the 11 months to November rose by 27.6% to P1.13 trillion from a year earlier. 

“Unless replenished by foreign exchange generating activities, the huge amount of obligations we have now may indicate a continuous trend,” John Paolo R. Rivera, an economist from the Asian Institute of Management, said in a Viber message. 

While the country’s foreign exchange buffers slipped, the end-January GIR level was enough to cover 10.3 months’ worth of imports and payments of services and primary income, the central bank said. 

The GIR was also about 8.6 times the country’s short-term external debt based on original maturity and 5.9 times based on residual maturity. 

Dollar reserves safeguard the economy from market volatility and show the country’s ability to repay debt. 

As of end-January, foreign currency deposits fell by three-quarters to $785.3 million from a month earlier and by 77.9% from a year ago. 

The BSP’s gold holdings were valued at $9.181 billion, 1.6% lower than a month earlier and 14% lower year on year. 

Monetary policy tightening and rising inflation could affect the central bank’s gold valuation, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. 

“Fed rate hikes tend to reduce the appeal of gold, with zero interest rate, but offset by the fact that gold is a hedge against higher inflation,” he said in a Viber message. 

The BSP expects the dollar reserves to rise to $112 billion by year-end.