GOV’T DEBT REPAYMENTS, GOLD PRICE DROP CUT PH’S DOLLAR RESERVES IN JUNE

The country’s total dollar holdings declined slightly in June as the Philippine government repaid some foreign debt and the value of gold, which forms part of the reserves, declined in the international market, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its gross international reserves, based on preliminary data, settled at $106.08 billion as of endJune 2021 from the end-May level of $107.25 billion.

“The month-on-month decrease in the [dollar reserve] level was mainly attributed to the downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market, foreign currency withdrawals of the national government from its deposits with the BSP to pay its foreign currency debt obligations and various expenditures, and BSP’s foreign exchange operations,” the agency said.

These were partly offset, however, by the inflows of the BSP’s income from its investments abroad, it added.

Despite the slight decline, the central bank said its dollar reserves represented “a more than adequate” external liquidity buffer equivalent to 12.1 months’ worth of imports of goods and payments of services and primary income.

These reserves are also worth about 7.8 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity.

By convention, dollar reserves are considered to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.

Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

According to the central bank, its net international reserves—which refers to the difference between the BSP’s gross dollar holdings and total shortterm liabilities—decreased by $1.15 billion to $106.08 billion as of end-June 2021 from the endMay 2021 level of $107.23 billion.

The level of dollar reserves, as of a particular period, is considered adequate, if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period.