AFP file photo
Foreign exchange reserves held by the central bank as buffer for economic shocks declined slightly in July as the national government drew on dollars to pay for maturing obligations, data released Friday showed.
Revaluation adjustments due to the US dollar’s strength also sent down the value of other reserve assets denominated in other currencies. Gross international reserves (GIR) remained ample, staying at levels well-above international standards.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s GIR stood at $80.4 billion as of end-July this year, lower by $200 million than the end-June 2015 level of $80.6 billion.
“The decrease in reserves was due mainly to the payments made by the national government of its maturing foreign exchange obligations and revaluation adjustments on the BSP’s gold holdings and foreign currency-denominated reserves,” the BSP said in a statement.
These were partially offset by the BSP’s foreign exchange operations and income from investments abroad as well as the national government’s net foreign currency deposits.
The end-July 2015 GIR level remains healthy as it can cover 10.6 months’ worth of imports of goods and payments of services and income.
International standards require governments to maintain reserves of about three to six months’ worth of imports. The end-July level was also equivalent to 6.3 times the country’s short-term external debt based on original maturity.
Reserves held by the BSP ensure that the economy’s supply of foreign currencies, which the government and businesses need to do business with the rest of the world, does not dry up.
Changes in the country’s dollar reserves also serve as an indication for the balance-of-payments (BOP) position, which is the summary of all business done between the Philippines and other countries. This accounts for inflows such as remittances, investments and revenues from dollar-earning industries, and outflows in the form of debt amortization and payments made for imported goods and services.
The BSP expects the Philippines’ reserves to settle at $81.6 billion by the end of 2015, up from $79.5 billion at the end of 2014.