Reserves inch down to $101.983B at end-June

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THE COUNTRY’S dollar reserves inched down at end-June as the government paid its foreign currency debt obligations and amid a decline in the value of the central bank’s gold holdings. 

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s gross international reserves (GIR) — which shield the country from liquidity shocks — stood at $101.983 billion at end-June.

This is 1.6% lower than the $103.646 billion recorded at end-May and by 3.5% from the record $105.762-billion level seen as of June 2021.

The BSP sees the country’s reserves ending the year at $105 billion.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s payments of its foreign currency debt obligations and downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the central bank said. 

At the end-June level, the country’s GIR is enough to cover 8.5 months’ worth of imports of goods and payments of services and primary income.

It is also equivalent to about 7.3 times the country’s short-term external debt based on original maturity and 4.6 times based on residual maturity.

GIR is made up of foreign investments, gold, foreign exchange, the country’s reserve position in the International Monetary Fund (IMF), and special drawing rights (SDR).

The BSP’s gold holdings were valued at $8.94 billion as of end-June, a 1% decline from the $9.03 billion as of end-May. Still, this was 0.68% higher than the $8.88-billion level a year earlier.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the lower value of the government’s foreign investments by the government amid the sell-off in the global stock and bond markets also caused GIR to decrease.

The BSP’s foreign investments amounted to $85.66 billion at end-June, down 2.6% from $87.95 billion in the prior month and by 7.11% from the $92.22 billion seen a year ago.

Meanwhile, the level of foreign exchange reserves rose by 34.89% to $2.83 billion at end-June from $2.098 billion as of May, and was 6.79% higher than the $2.65 billion seen last year.

Our reserve position in the IMF was at $755.9 million, down 1.61% from $768.3 million the month prior and by 5.32% from the $798.4 million logged a year ago.

SDRs were, meanwhile, at $3.8 billion as of June, steady from the previous month but more than double the $1.22 billion seen a year prior.

Mr. Ricafort said the decline in the GIR “somewhat correlated” with the peso’s decline versus the dollar in recent months.

“Nevertheless, GIR is still equivalent to 8.5 months of imports or still way above the minimum international threshold of 3-4 months and could still provide enough buffer/support versus any speculations versus the peso,” Mr. Ricafort added. — KBT