The country’s gross international reserves (GIR) contracted in April, dropping to $104.6 billion as of end of the month from $106.7 billion at end-March, the Bangko Sentral ng Pilipinas (BSP) said.
It was the second successive month of decline for the country’s GIR. At end-March, the GIR level also fell, hitting $106.7 billion from $107.4 billion in February.
Year-on-year, the GIR level in April expanded by 1.9 percent or $2.0 billion from $102.6 billion.
The month-on-month contraction came mainly from the national government’s foreign currency withdrawals, and the BSP’s foreign exchange market operations, the central bank reported late Wednesday.
The national government used its withdrawals to meet external debt obligations and pay for various expenditures.
The debts paid by the national government, together with the BSP’s market operations, amounted to $1.5 billion, which caused a 1.9 percent contraction in the GIR, the central bank said.
The GIR consists of Philippine investments abroad, gold and foreign exchange holdings, as well as the country’s reserve position in the IMF and its special drawing rights.
Strong liquidity buffer
The latest GIR level provides a strong external liquidity buffer equivalent to 7.2 months worth of commodity imports and payments of services and primary income, the BSP said.
It also covers about 3.6 times of the country’s short-term external debt based on residual maturity.
The central bank considers the GIR as adequate if it can finance at least three months’ worth of imports and payments of services and primary income.
The GIR in April consisted of $86.09 billion in foreign investments, or 82.29 percent of the total, and $13.34 billion in gold, accounting for 12.75 percent.
The country’s IMF reserve position stood at $741.6 million while its special drawing rights remained steady at $3.80 billion.
A comfortable level
Philippine Institute for Development Studies senior research fellow John Paolo Rivera said in a message sent to this paper that the country’s foreign reserves remain at a comfortable level.
“It is equivalent to more than 7 months’ worth of imports, well above the IMF’s 3-month threshold,” Rivera said.
Gong forward, Rivera said the state of the country’s foreign reserves hinges on how the peso would perform against the dollar, as well as on remittance and business process outsourcing inflows, and external borrowings.
Michael Ricafort, RCBC’s chief economist, said the international reserves have breached the $100-billion mark for 19 consecutive months since October 2023–“still a good signal” despite two successive months of contractions.
“The country’s strong external position could help stabilize the peso exchange rate and support the country’s favorable credit ratings of one to three notches above the minimum investment grade in recent years despite the COVID-19 pandemic,” Ricafort said.
The GIR had been posting a net increase since September 2022, when the country’s structural US dollar inflows began to rise, such as OFW remittances and BPO revenues, coupled with declines in global crude oil and other global commodity prices, he added.
