Forex reserves dip to $15.99-B as of end-July

The country’s gross international reserves (GIR) dipped below the $16 billion level for the first time this year, settling at $15.990 billion at the end of July, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The latest figure was 1.2 percent lower than the end-June level of $16.179 billion and less than one percent lower than the year ago level of $16.103 billion.

"The slight decrease in GIR was mainly attributed to the debt service requirements of the National Government and the BSP. These were partly offset, however, by inflows from the NG’s deposit with the BSP of proceeds from re-opening of its global bond issue," the BSP said.

The BSP said the July GIR level was adequate to cover about 4.4 months of imports of goods and payments of services and income. This level was also equivalent to 2.2 times the country’s short-term debt based on original maturity and 1.3 times based on residual maturity.

The July GIR level remains above the $14 billion to $15 billion target for the year.

Short-term debt based on residual maturity refers to outstanding short-term external debt on original maturity 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 BSP, the decline in the GIR was slightly offset by inflows from the NG’s reopening of its Global Bond issue ($250 million) whose proceeds were deposited with the BSP.

The BSP expects the GIR to dip to as low as $14 billion this year but government borrowing has been strong early in the year, due mostly to the funding requirements of the National Power Corp. (Napocor) which had to be sourced externally.

The BSP’s net international reserves (BSP-NIR) as of end-July 2004, inclusive of revaluation of reserve assets and reserve-related liabilities, decreased to $13.789 billion, lower by $93 million than the end-June 2004 level of $13.882 billion.

The BSP said it expected the overall balance of payments to be better than expected by yearend but only because of an anticipated slowdown in imports which means that there would be less need for dollars.

The BSP has been reviewing its BOP projections after getting the initial feedback from export industries.