December 9, 2024 | 12:00am
MANILA, Philippines — The country’s dollar reserves fell for a second straight month in November as the national government paid some of its foreign debt obligations and the Bangko Sentral ng Pilipinas (BSP) utilized the greenback to shore up the peso’s value.
Based on preliminary data from the BSP, gross international reserves (GIR) stood at $108.5 billion as of end-November, down by 2.3 percent from $111.1 billion in end-October.
The GIR is the sum of all foreign exchange flowing into a country and serves as a buffer to ensure the government will not run out of foreign exchange that it can use in case of external shocks.
Year-on-year, the GIR, however, rose by 5.6 percent from $102.72 billion in November 2023.
“The month-on-month decrease in the GIR level reflected mainly the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said.
The central bank also attributed the lower GIR to its net foreign exchange operations and lower valuation of its gold holdings due to the drop in gold prices in the international market.
Broken down, foreign investments registered with the BSP dipped by two percent to $91.21 billion as of end-November from $93.1 billion a month ago. Still, this was 6.8 percent higher than the $85.42 billion a year earlier.
Foreign exchange declined by 18.2 percent to $1.75 billion in November from $2.14 billion in October. It also slipped by 8.4 percent from $1.91 billion a year ago.
Meanwhile, buffers in the form of gold were valued at $11.02 billion, 2.9 percent lower than the $11.35 billion as of end-October, but still higher by 1.8 percent from $10.82 billion a year earlier.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said markets priced in possible protectionist policies by US president-elect Donald Trump, which caused the decline in foreign investments.
He also noted that the BSP’s foreign exchange holdings went down amid the volatility of the peso-dollar exchange rate during the month, especially as the peso depreciated to 59 to $1 on Nov. 26.
As of end-November, the dollar reserves were equivalent to 7.8 months’ worth of imports of goods and payments of services as well as primary income.
It was also enough to cover 4.3 times the country’s short-term external debt based on residual maturity.
By convention, GIR is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.
It is also considered adequate if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate 12-month period.
After hitting $110.12 billion in 2020, the buffer declined to $108.79 billion in 2021 and $96.15 billion in 2022, before picking up to $103.75 billion last year.
The BSP expects the country’s dollar reserves to hit $106 billion this year and $107 billion next year.
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