The Philippines’ gross international reserves (GIR) slipped to a seven-month low of $80.78 billion in July, with the Bangko Sentral ng Pilipinas (BSP) attributing the drop to its foreign exchange operations and government debt payments.
A year earlier it was at $85.5 billion and July’s GIR level was down 0.65 percent from the previous month’s $81.32 billion, the BSP reported on Monday. The latest figure was the lowest since reserves dropped to $80.69 billion in December last year.
“The month-on-month decline in the dollar reserves was due mainly to outflows arising from central bank’s foreign exchange operations and payments made by the national government for its maturing foreign exchange obligations,” the BSP said in a statement.
“These were partially offset by revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market and net foreign currency deposits by the NG [national government]as well as BSP’s income from its investments abroad,” it added.
Emilio Neri Jr., Bank of the Philippine Islands (BPI) vice-president and lead economist, said the central bank likely saw the need to manage volatility in the foreign exchange market.
“Revaluation of asset prices may have also partially led to the decline,” he added.
The lower GIR, Neri said, means that the Philippines’ capacity to service its import requirements and external debt had diminished.
The reserves were enough to cover 8.6 months worth of imports, down from 8.7 months in June and the 9.9 months recorded year earlier, central bank data showed.
It was also equivalent to 5.5 times the short-term external obligations due within one year and 3.7 times based on residual maturity.
Net international reserves — the difference between the GIR and total short-term liabilities — fell to $80.78 billion from $81.32 billion in June.
Neri said further depletion was likely as the government funds its ambitious “Build Build Build” infrastructure program via external borrowings.
The Duterte administration plans to spend P847 billion this year for infrastructure development to meet a target infrastructure spending-to-gross domestic product ratio of 5.3 percent.
“However, if Philippine peso is allowed to depreciate further should it come under pressure before the end of the year, we may see a more stable print for GIR in the coming months and reassure our creditors of our solid capacity to pay for our external obligations,” Neri said.
The GIR is the sum of the country’s transactions with the rest of the world, consisting of the reserve position with the International Monetary Fund, foreign exchange holdings, gold reserves, special drawing rights and foreign investments.