This photo shows bundles of Us dollar notes. Viet Nam News/Asia News Network
MANILA, Philippines — More dollars entered – than left – the Philippine economy in October on the back of proceeds from the national government’s foreign borrowings during the period as well as remittances from overseas Filipinos, according to the central bank.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s overall balance of payments position posted a surplus of $1.14 billion in October 2021, lower than the $3.44 billion surplus recorded in the same month last year.
The surplus posted last month “reflected inflows arising mainly from the national government’s net foreign currency deposits with the BSP and the BSP’s income from its investments abroad,” the agency said.
The positive dollar net inflows in October brought the cumulative surplus for the January-October period to a $476 million surplus, reversing the deficit of $665 million for the first nine months of the year.
The balance of payments is the net amount of dollar inflows to and outflows from a particular economy brought about by its transactions with the rest of the world. These include products and services bought or sold vis-a-vis foreign parties, and long- or short-term investment flows to or from overseas, among others.
A sustained positive balance of payments position conventionally results in a stronger domestic economy, while regular deficits have the opposite effect.
According to the central bank, the current year-to-date balance of payments level is lower than the $10.31 billion surplus recorded in the same period a year ago.
“Based on preliminary data, this cumulative surplus was partly attributed to net inflows from personal remittances, net foreign borrowings by the national government, foreign direct investments, and trade in services,” it said. This amount includes proceeds from the retail onshore dollar bonds issued by the government which were deposited to the BSP amounting to $1.593 billion.
The balance of payments position reflects an increase in the final gross international reserves level to $107.89 billion as of end-October 2021 from $106.6 billion as of end-September 2021.
The latest dollar reserve level represents an external liquidity buffer equivalent to 10.8 months’ worth of imports of goods and payments of services and primary income.
Specifically, it ensures the availability of foreign exchange to meet the 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.
It is also about 7.9 times the country’s short-term external debt based on original maturity and 5.5 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.