• Oct foreign reserves slip off record high

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    Down $39M at $86B on foreign debt payments, lower gold prices

    The Philippines’ gross international reserves (GIR) dipped in October from a record high in September, dragged by foreign debt payments by the national government, the central bank’s foreign exchange operations and lower prices of gold, official figures showed on Monday.

    Data released by the Bangko Sentral ng Pilipinas (BSP ) showed the GIR level stood at $85.75 billion in October, down $39 million from $86.13 billion recorded in September.

    From a year earlier, however, gross reserves in October were up 5.7 percent from $81.097 billion.

    The GIR is the sum of a country’s foreign transactions, composed of the reserve position in the International Monetary Fund, foreign exchange holdings, gold reserves, and special drawing rights (SDRs) and foreign investments.

    Support from renminbi

    The BSP said the drop in GIR was “due mainly to outflows arising from payments made by the national government for its maturing foreign exchange obligations, foreign exchange operations of the BSP and revaluation adjustments on the BSP’s gold holdings resulting from a decrease in the price of gold in the international market.”

    Partially offsetting the outflows were the reclassification of renminbi-denominated accounts from non-reserve to reserve eligible assets and the national government’s net foreign currency deposits, along with the BSP’s income from investment abroad.

    “The Monetary Board approved the inclusion of the Chinese renminbi in the official international reserves of the BSP effective 13 October 2016 to ensure the availability of the said currency to the banking system in consideration of the rising economic and financial importance of China,” the central bank said.

    10-mth import cover

    The latest GIR level is enough to cover 10 months worth of merchandise imports and payments of services and income.

    It is also equivalent to 6.1 times the country’s short-term external debt due with a one year, and 4.4 times based on residual maturity.

    Net international reserves—which refer to the difference between the BSP’s GIR and total short-term liabilities—dropped to $85.74 billion from $86.13 billion.

    Ramp up FDI – analyst

    An analyst stressed the need for the government to work at boosting foreign direct investment inflows to help strengthen the reserves and balance of payments position further.

    IHS Markit Asia Pacific chief economist Rajiv Biswas said the value of foreign exchange reserves is expected to remain broadly stable during the remainder of 2016, helped by the current account surplus.

    “Continued strong exports of IT-BPO [information technology-business process outsourcing]services, as well as sustained levels of overseas worker remittances continue to keep the underlying external account position favorable,” he said.

    However, he pointed out that a key challenge in the year ahead would be to boost foreign direct investment inflows to help further strengthen the reserves and balance of payments position.

    Meanwhile, Bank of the Philippine Islands lead economist Emilio Neri Jr. expects this trend of falling stock of foreign reserves to continue in the coming quarters “as the country’s positive current account position continues to decline and eventually revert to deficits through the late 2017 through early 2018.”

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