The Philippines made substantially more dollars than it spent in its overseas transactions in May, due in part to a surge in foreign borrowings and a steep drop in import expenses as economic activity slowed to a crawl due to the COVID-19 pandemic.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s overall balance of payments position posted a surplus of $2.43 billion in May 2020, which is 2.6 times higher than the $928 million surplus recorded in the same month in 2019.
The balance of payments measures the net tally of transactions — whether for the trade of goods and services, or financial market flows — made by a country’s economy, whether from the public or private sectors.
The BSP said the May 2020 dollar inflows came mainly from foreign currency deposits of the national government and the BSP’s foreign exchange operations and income from investments abroad.
These inflows were partially offset, however, by the foreign currency withdrawals made by the government to pay its foreign currency debt in May, the BSP said.
The sudden and sharp drop in imports due to the lockdown imposed to slow coronavirus infections had helped raise the country’s cumulative balance of payments position to a surplus for the second consecutive month in 2020.
At the end of May, the running tally for balance of payments stood at $4.03 billion.This was lower than the $5.19 billion surplus recorded during the same period in 2019, though.
In addition to inflows from the government’s foreign borrowings in April and May, the central bank said lower merchandise trade deficit and net inflows of personal remittances from overseas Filipinos also contributed to the surplus.
“These inflows fully negated the impact of lower trade in services receipts, the net foreign portfolio investment outflows and lower foreign direct investments inflows,” the BSP said.
The central bank noted that the balance of payments position reflects an all-time high final gross international reserves level of $93.29 billion as of end-May 2020.
At this level, the dollar reserves are equivalent to 8.4 months’ worth of imports of goods and payments of services and primary income. It is also worth about seven times the country’s short-term external debt based on original maturity and 4.6 times based on residual maturity.