Foreign reserves decline for a third straight month to fresh two-year low

THE COUNTRY’s dollar reserves dipped anew in November to a fresh two-year low on the back of lower gold valuations and debt payments made by the national government, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Gross international reserves ( GIR) totalled $80.313 billion last month, down from October’s $80.419 billion and $81.451 billion posted in November 2016. The amount is also the lowest since the $80.173 billion logged in November 2015, according to central bank data.

International reserves are made up of gold, the BSP’s assets held in foreign currencies, country quotas with the International Monetary Fund ( IMF) as well as foreign currency deposits held by government and state-run firms.

In a statement, the BSP attributed the decline in reserves to bigger outflows as the government paid off its maturing foreign currency debt, alongside lower gold valuations in the international market.

The value of the BSP’s gold holdings slipped to $8.046 billion compared to $8.065 billion the previous month. Still, the amount went up from the $7.402-billion valuation recorded in November 2016.

“These were partially offset by net foreign currency deposits of the national government and income from the BSP’s investments abroad,” the central bank said.

Foreign investments continued to account for the bulk of GIR at $ 65.244 billion last month, slipping from October’s $65.257 billion and down 5.4% from the $68.934 billion a year ago.

The BSP’s foreign exchange holdings also dropped to $5.393 billion from $5.462 billion in October.

The central bank sometimes uses the reserve fund to influence daily peso-dollar trading by buying or selling more units in a “tactical intervention” to temper exchange rate swings.

The peso averaged P51.0384 versus the dollar in November, recovering slightly as it traded at the P50 level against the greenback.

Funds parked with the International Monetary Fund (IMF) also declined to $ 440 million from $445 million in October.

The country’s special drawing rights — the amount which the country can tap in the IMF’s reserve currency basket — steadied at $1.191 billion. Amounts in the IMF basket are expressed in US dollar, Japanese yen, euro, British pound and the Chinese yuan.

Despite the lower GIR level, the reserve stash can still cover up to 8.4 months’ worth of import payments — well above the threemonth international standard.

It can likewise pay up to 5.4 times the country’s short- term foreign debt when computed on original maturity, and up to 3.7 times based on residual terms (outstanding external debt with up to one-year maturity, plus principal payments on mediumand long-term loans of the public and private sectors falling due in the next 12 months.)

However, the foreign currency buffer settled below the $ 80.5 billion forecast given by the BSP for the entire year, and is already lower than the $ 80.692- billion GIR level at end-2016.

International credit raters and multilateral lenders have cited these reserves as a source of credit strength, as they help cushion the economy against external shocks. —