Forex reserves slip to $80.4B

The country’s foreign exchange reserves slipped in July on the back of the strengthening of the US dollar as well as the decline in the price of gold in the world market, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the central bank yesterday showed the country’s gross international reserves (GIR) stood at $80.4 billion in July compared to $80.6 billion in June and July last year.

BSP Governor Amando Tetangco Jr. traced the decline in reserves to the payments made by the national government for its maturing foreign exchange obligations.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines does not run out of foreign exchange to pay for imported goods and services, or maturing obligations in case of external shocks.

Tetangco also cited the revaluation adjustments on the BSP’s gold holdings and foreign currency-denominated reserves as the reasons for the decline in the country’s GIR.

Data showed the value of the central bank’s gold holdings declined seven percent to $6.84 billion in July from $7.38 billion in June.

The BSP chief said the decline was cushioned by the central bank’s foreign exchange operations and income from investments abroad as well as the national government’s net foreign currency deposits.

On the other hand, income from the BSP’s investments abroad increased to $71.32 billion in July from $70.65 billion in June.

If it deems necessary, the BSP buys dollars from the foreign exchange market to prevent sharp depreciation of the peso. It can also sell to avoid sharp appreciation of the local currency.

Tetangco explained the foreign exchange reserves remain ample as it could cover 10.6 months’ worth of imports of goods and payments of services and income.

He added the end-July 2015 GIR level is also equivalent to 6.3 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity.

The BSP expects the Philippines to end the year with about $81.6 billion in dollar reserves.

It also sees the country’s balance-of-payments (BOP) position – the summary of all transactions between the Philippines and the rest of the world – to post a surplus of about $2 billion, a reversal of the $2.9 billion deficit booked last year.