THE COUNTRY’S dollar reserves declined as of end-May amid higher foreign currency withdrawals to repay debt and the lower valuation of the central bank’s gold reserves.
Gross international reserves (GIR) — which shield the country from liquidity shocks — stood at $103.53 billion as of end-May, data from the Bangko Sentral ng Pilipinas (BSP) showed on Tuesday.
The end-May GIR fell by 1.7% from the $105.4 billion as of end-April, and by 3.4% from $107.25 billion in May 2021.
“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement on Tuesday evening.
Ample foreign exchange buffers protect the country from market volatility and ensure that it is capable of paying its debts in the event of an economic downturn.
The level of dollar reserves as of end-May is enough to cover about 6.6 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity.
It is also equivalent to 9.1 months’ worth of imports of goods and payments of services and primary income.
“At 9.1 import cover, international reserves remain more than adequate to cover the dollar needs of the economy; and it is very much above the 3-month rule of thumb where reserves will be considered worrisome,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.
The BSP also attributed the drop in the dollar reserves to the downward adjustment in the value of the BSP’s gold holdings as the price of gold declined in the global market.
The BSP’s gold holdings were valued at $9.02 billion as of end-May, a 2.7% decline from the $9.27 billion as of end-April. This was also 8.8% lower than the $9.90-billion level a year earlier.
The central bank’s reserve assets also include foreign investments, foreign exchange, reserve position in the International Monetary Fund (IMF) and special drawing rights (SDR).
The BSP’s foreign investments amounted to $87.874 billion as of end-May, 1.8% down from $89.562 billion in the prior month and 5% down from $92.835 billion in 2021.
Meanwhile, the level of foreign exchange reserves rose by 3% to $2.074 billion as of end-May from $2.012 billion in April, but 15% lower than the $2.464 billion seen last year.
Reserves with the IMF tripled to $3.783 billion as of end-May, from the $1.235 billion in May 2021.
In August 2021, the Philippines received $2.8-billion worth of SDRs from the IMF, as part of the latter’s efforts to help countries recover from the coronavirus pandemic.
“Moving forward, we expect a slight weakening of reserves towards the end of the year as the current account balance is expected to widen. Imports are bound to increase due to the high price of oil, and food and exports will likely weaken due to a more subdued global economy,” Ms. Velasquez said.
The BSP expects to end the year with $108 billion in dollar reserves.
GIR stood at $108.891 billion as of 2021, 1.11% lower than the record $110.117-billion level as of end-2020. — Keisha B. Ta-asan