MANILA, Philippines – The Philippines’ foreign reserves fell further in May due to foreign debt payments, weaker gold holdings, and BSP efforts to support the peso amid Middle East war-driven market volatility.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the country’s gross international reserves (GIR) settled at $103.98 billion, the lowest in over a year or since January 2025’s $103.3 billion.

READ: GIR weighed down by MidEast war-induced volatility

The reserves serve as the country’s main shield against external shocks, helping finance imports and foreign debt payments in periods when export earnings or access to foreign loans dry up.

The central bank holds most reserves in A-rated foreign investments, alongside gold, foreign exchange, and IMF reserve assets.

At the current pace, the reserve level is running below the central bank’s year-end projection of $111 billion.

A closer look at the report shows the central bank’s offshore investments—which account for the bulk of the reserves—fell to $79.2 billion, the lowest in more than three years.

The decline followed the late-February Gulf conflict, which rattled markets and spurred a flight to safe-haven assets. The upheaval also set off an oil-price shock that stoked inflation fears and expectations of higher interest rates.

Gold, forex holdings

A drop in the central bank’s gold holdings to a five-month low of $19.5 billion added pressure. Gold, a traditional safe-haven asset, becomes less attractive when interest rates are high because it offers no yield.

Special drawing rights with the IMF stood unchanged at nearly $4 billion, while the country’s contribution to the same institution dropped by 1.6 percent month-on-month to $712.2 million.

Meanwhile, the central bank’s foreign exchange holdings rose to $583 million.

Overall, the latest GIR level was equivalent to 6.9 months’ worth of imports of goods and payments of services and primary income. It also covers 3.6 times the country’s short-term external debt based on residual maturity.

GIR is considered adequate when it can cover at least three months of imports and 100% of foreign liabilities due within a year. /pai INQ