PH forex reserves fell in April on soft gold prices

The country’s foreign exchange reserves fell slightly in April from the previous month due to declining prices of gold in the world market.

The Bangko Sentral ng Pilipinas reported Tuesday that the country’s gross international reserves (GIR) amounted to $83.38 billion as of end-April, down 0.7 percent from $83.95 billion as of end-March.

While the bulk of the country’s GIR is composed of foreign currencies led by the US dollar, about $9 billion is in gold.

After hitting $1,500, gold plunged to a two-year low of $1,321 an ounce on April 16 due to declining demand.

Analysts said indicators of an improving US economy, led by rising employment, encouraged some investors to dump gold in favor of the US dollar.

“The price of gold is negatively correlated with the US dollar. As such, having gold as part of the reserves remains a good diversification strategy,” BSP Governor Amando Tetangco Jr. earlier told reporters.

Besides the drop in the price of gold, withdrawals by the national government and state-owned Power Sector Assets and Liabilities Management Corp. (PSALM) also contributed to the month-on-month drop in the GIR.

Despite the drop from March, the central bank said the latest amount of foreign exchange reserves was up by 9 percent from $76.54 billion in April last year.

The BSP also said the GIR remained significant as this was enough to cover 11.8 months worth of the country’s import requirements.

Moreover, it was 6.3 times the total outstanding debts of private and government entities in the Philippines maturing within one year.

According to international benchmarks, a GIR is considered comfortable if this is equal to at least four months worth of imports and enough to meet short-term foreign debts.

The biggest contributors to the country’s foreign exchange reserves are remittances from overseas Filipino workers and foreign investments in business process outsourcing (BPO).