September dollar reserves dip as gov’t pays foreign loans

MANILA, Philippines—The country’s dollar reserves in the central bank dipped slightly in September as a result of government withdrawals of foreign currency to pay maturing foreign debt, the regulator said on Wednesday (Oct. 13).

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its gross international reserves, based on preliminary data, declined to $107.16 billion as of end-September 2021 from August’s level of $107.96 billion.

“The month-on-month decrease in dollar reserves was attributed mainly to the debt service payment of the national government’s foreign currency debt obligations and downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the agency said.

Despite this, it noted that the latest dollar reserve level “represents a more than adequate external liquidity buffer” equivalent to 10.8 months’ worth of imports of goods and payments of services and primary income.

By convention, dollar reserve levels are viewed to be adequate if they can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.

The current level is also worth about 7.6 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity.

Net international reserves — which refer to the difference between the BSP’s gross reserves and total short-term liabilities — decreased by $810 million to $107.15 billion as of end-September 2021 from August’s level of $107.96 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 reserves, 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, public and private, falling due within the immediate twelve-month period.

TSB