Philippines’ foreign exchange reserves down to $95B at end-September —BSP

The country’s foreign currency reserves shrunk as of end-September this year as the national government settled its external obligations, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary BSP data showed that the Philippines’ gross international reserves (GIR)—a measure of a country's ability to settle import payments and service foreign debt—stood at $95 billion at the end of last month from $97.4 billion as of end-August.

GIR or foreign exchange reserves are assets held by a central bank, which include gold and foreign currencies, to back liabilities.

In particular, the BSP reserve assets consist of foreign investments, gold, foreign exchange, reserve position in the International Monetary Fund (IMF), and special drawing rights.

“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.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the GIR at $95 is “still relatively high” and “could still strengthen the country’s external position.”

Ricafort said the end-September GIR “would continue to provide structural support/buffer/cushion for the peso exchange rate, especially greater protection against any speculative attacks, going forward.”

The latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income, according to the BSP.

By convention, GIR is viewed 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.

Moreover, the end-September GIR is also about 6.8 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

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.

The level of GIR, 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, according to the BSP.

Likewise, the net international reserves, which refers to the difference between the BSP’s reserve assets (GIR) and reserve liabilities — short-term foreign debt and credit and loans from the International Monetary Fund (IMF) — decreased by $2.4 billion to $95.0 billion as of end-September from the end-August level of $97.4 billion. —KG, GMA News