Philippines’ foreign reserves down to $103.4B in January — BSP

The Philippines’ foreign reserves saw a slight decline as of end-January 2024 on the back of the government’s settlement of some of its obligations.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed the country’s gross international reserves (GIR) —a measure of the country’s ability to settle import payments and service foreign debt— as of last month stood at $103.4 billion, slightly lower than the end-December 2023 level of $103.8 billion.

The BSP’s 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 decline in the GIR level reflected mainly the national government’s payments of its foreign currency debt obligations and downward valuation adjustments in the Bangko Sentral ng Pilipinas’ gold holdings due to the decrease in the price of gold in the international market,” the central bank said.

In an emailed commentary, Riza Commercial Banking Corp. chief economist Michael Ricafort said the month—on-month decline in the GIR level was “amid some net payment of the national government's foreign debt and after some decline in foreign investments amid the healthy profit-taking in the US/global financial markets in January 2024 after hefty gains from November 2023 to December 2023.”

Ricafort also cited the decline in the value of the BSP’s gold holdings after some downward correction in world gold prices from record highs in December last year.

 Despite the decline, the end January GIR level was a “more than adequate external liquidity buffer equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.”

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 —earnings of overseas Filipino workers as well as the profit of Philippine investments abroad.

Moreover, it is also about 6.0 times the country’s short-term external debt based on original maturity and 3.9 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% cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period,” the BSP said.

Similarly, the net international reserves —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— decreased by $900 million to $102.8 billion as of end-January 2024 from the end-December 2023 level of $103.7 billion. — RSJ, GMA Integrated News