Dollar reserves slipped in March as gov’t paid maturing foreign debt

The country’s dollar reserves dipped slightly in March as the national government withdrew hard currency from the central bank to repay some of its maturing foreign debt, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP said its gross international reserves, based on preliminary data, settled at $104.82 billion as of end-March 2021 from the end-February 2021 level of $105.16 billion.

“The latest GIR level represents a more than adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the BSP said, adding that this buffer was equivalent to 12 months’ worth of imports of goods and payments of services and primary income.

“It is also about 7.5 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity,” the BSP added.

Income from investments

By convention, a country’s dollar reserves are viewed to be adequate if it can finance at least three-months’ worth of the domestic economy’s imports of goods and payments of services and primary income.

According to the central bank, the month-on-month decrease in the dollar reserve level reflected outflows mainly from the net withdrawal in the national government’s foreign currency deposits with the BSP, which were largely used for debt servicing, and a downward adjustment in the value of BSP’s gold holdings due to the decrease in the price of gold in the international market.

These outflows were partly offset, however, by the BSP’s income from its investments abroad.

Net international reserves

Similarly, the net international reserves—which refer to the difference between the BSP’s gross dollar reserves and total short-term liabilities— decreased by $340 million to $104.81 billion as of end-March 2021 from the end-February 2021 level of $105.15 billion.

Short-term debt based on residual maturity refers to outstanding external debt with 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.

The level of dollar reserve, as of a particular period, is considered adequate, if it provides at least 100 percent cover for the payment of the country’s foreign liabilities falling due within the immediate 12-month period, the BSP explained. INQ