Net dollar inflows to PH almost doubled in Jan-Nov period on foreign loans, import slowdown

MANILA, Philippines — The Philippines retained almost twice many dollars in the first 11 months of the year as the coronavirus pandemic caused the government and the private sector to borrow more from abroad while the economic contraction caused imports to drop sharply.

This said the Bangko Sentral ng Pilipinas which reported on Monday that the country’s overall balance of payments position posted a cumulative surplus of $11.79 billion from January to November.

This was 87 percent higher than the $6.27 billion surplus recorded for the same period a year ago.

The balance of payments position represents the net flow of foreign currency into or out of the economy during a given period, recording the economy’s income from exports of goods and services and investment inflows, offset against spending for imports and investment outflows.

“Based on preliminary data, the current balance of payments surplus was supported mainly by higher net foreign borrowings by the national government and lower merchandise trade deficit along with sustained net inflows from personal remittances, foreign direct investments, and trade in services,” the central bank said in a statement.

For November 2020 alone, the Philippine economy posted a dollar flow surplus of $1.47 billion.

Last month’s balance of payments surplus reflected inflows mainly from the BSP’s foreign exchange operations and income from its investments abroad. “These inflows were partly offset, however, by the foreign currency withdrawals the national government made to pay its foreign currency debt obligations,” the central bank said.

The latest balance of payments position reflects an increase in the final gross international reserves level to $104.82 billion as of end-November 2020 compared with $103.8 billion as of end-October 2020.

The central bank explained that the latest dollar reserve level represents an “adequate” external liquidity buffer, which can help cushion the domestic economy against external shocks.

Specifically, it ensures the availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.

This is equivalent to 11.2 months’ worth of imports of goods and payments of services and primary income. It is also about 9.2 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity.

Short-term debt based on residual maturity refers to outstanding external debt with an original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

/MUF