The country’s foreign currency reserves dipped a bit in February after the government settled some of its foreign currency debts, settling at $99.3 billion from $100.67 billion in January.
The country’s foreign exchange reserves dropped to $99.3 billion in February from $100.67 billion the month before because the government settled some of its foreign currency debts, the Bangko Sentral said on Tuesday.
Year on year, dollar reserves declined by 7.9 percent from $107.8 billion as of end-February 2022.
“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) net 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.
Foreign currency deposits dropped by 74.8 percent to $532.8 million from $2.12 billion a month earlier and by 11.8 percent from the $604.2-million level a year ago, Business World reported.
The central bank also attributed the lower GIR to the “downward adjustments in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market.”
BSP data showed the value of gold reserves dropped by 4.8 percent to $9.33 billion as of end-February from $9.8 billion as of end-January. It was also 2.7 percent lower from the $9.59-billion level a year earlier.
The end-February GIR level was enough to cover 7.5 months’ worth of the country’s imports of goods and payments of services and primary income.
It was also equivalent to about 6.1 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.
Ample foreign exchange buffers protect the country from market volatility and ensures its capability to pay debts in case of an economic downturn.
Security Bank Corp. Chief Economist Robert Dan J. Roces said dollar reserves slightly fell due to higher foreign debt payments for the month.
“However, foreign debt obligations this year are much smaller compared with last year, and the peso seems to be confined to a range which allows for some buildup of the reserves,” he said.
Riizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said possible foreign exchange intervention activities through buying or selling of US dollars may have affected the latest GIR level.
The BSP intervenes in the foreign exchange market to smoothen volatility.
While the peso rebounded to the P54-a-dollar mark in January, it depreciated by 1.25 percent or P0.69 in February, closing the month at P55.33 against the dollar on Feb. 28 from its P54.64 close on Jan. 31.
Ricafort noted the decline in foreign exchange holdings and gold reserves were offset by the continued month-on-month increase in foreign investments amid net gains in global financial markets since January.
Gains from the BSP’s investments abroad edged 0.8 percent higher to $84.86 billion from $84.15 billion a month earlier, but it was lower by 8.6 percent than $92.89 billion a year ago.
According to the BSP, net international reserves declined by $1.3 billion or 1.3 percent to $99.3 billion as of end-February from $100.6 billion a month prior.
Net international reserves are the difference between the BSP’s reserve assets (GIR) and reserve liabilities such as short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).
The country’s reserve position in the IMF also slipped by 1.4 percent to $785.8 million from $797.3 million a month earlier and 1.6 percent from the $798.9 million as of end-February 2022.
The fast recovery in foreign tourism revenues amid China’s reopening, alongside the continued growth in structural inflows from remittances and exports, could help support the country’s dollar reserves in the coming months, Ricafort said.
For his part, Roces said the GIR may end the year higher than the $100-billion level.
The BSP projects the GIR level at $93 billion by end-2023.
Tags: #BSP, #GIR, #nationalgovernment, #paymentofforeigndebts