The Philippines saw more dollars enter than exit the local economy in July, but just barely, as proceeds from the government’s foreign loans were offset by repayments for overseas borrowers, according to the central bank.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s overall balance-of-payments (BOP) position posted a surplus of $8 million in July 2020, lower than the $248 million dollar flow surplus recorded in the same month last year.
“The surplus reflected mainly the inflows from the national government’s foreign loan proceeds that were deposited with the BSP as well as the BSP’s income from its investments abroad,” the central bank said.
These inflows were offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations during the month in review.
The balance of payments represents the net amount of foreign currency flowing into or out of the local economy, considering everything the Philippines earns from the goods and services it sells to the rest of the world against everything it pays for from overseas. This tally also takes into account funds that flow into or out of the country’s financial markets for investment purposes.
A surplus means the country is earning more than it spends, while a deficit means the opposite, with the corresponding effects on the value of the currency.
For the fourth consecutive month, the cumulative BOP position recorded a surplus, registering $4.12 billion at the end of seven months. This cumulative surplus was lower than the $5.04-billion surplus recorded for the same period a year ago.
The current surplus was supported mainly by foreign borrowings of the national government, the bulk of which were drawn in April up to July, and the lower merchandise trade deficit.
“These positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments and lower net inflows from foreign direct investments, trade in services, and personal remittances,” the central bank said.
The latest BOP position reflected a record high final gross international reserves level of $98.6 billion as of end-July 2020.
At this level, the country’s total dollar reserves represent an “ample” external liquidity buffer, which can cushion the domestic economy against external shocks, the central bank explained.
This is equivalent to 8.9 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7.6 times the country’s short-term external debt based on original maturity and 4.9 times based on residual maturity.