RP foreign exchange reserves level hits new high of $39.6 billion

MANILA, Philippines - The country’s gross foreign exchange reserves reached $39.6 billion in June, charting a new record high that would support payments for imports and maturing debt.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the June gross international reserve (GIR) was only slightly higher than the end-May level of $39.589 billion.

The BSP said these reserves were enough to cover 6.8 months worth of imports of goods and payments of services and income, equivalent to 6.1 times the country’s short term external debt.

According to BSP officer in charge and Deputy Governor Armando Suratos, the GIR included foreign exchange inflows from the central bank’s foreign exchange operations as well as income from its investments abroad.

Suratos said there were also foreign exchange deposits from the government.

But Suratos said these inflows were counterbalanced by outflows arising from the payment of maturing foreign exchange obligations of both the BSP and the government.

The GIR also reflected losses in the BSP’s gold holdings attributable to the decline in the price of gold in the world market in June.

The central bank had projected the country’s foreign exchange reserve to reach only $37.5 billion this year, down-scaling its earlier projected level of $39 billion as the growth in remittances grinds to a halt this year due to job losses abroad.  

With the down-scaling of the projected reserves, the government also revised its projected balance of payments (BOP) position from $500 million to $700 million, mainly because of lower oil prices.

The gross international reserve (GIR) is the sum of all foreign exchange flowing into the country and the balance of payment (BOP) position is the remaining balance net of all external payments for debt servicing and imports.

The BSP said remittances from overseas Filipinos will reach $16.4 billion this year, unchanged from the same level in 2008—marking the first time that remittances would not expand since the country stated exporting workers.

The projections were the latest that have been approved by the Development Budget Coordinating Committee (DBCC), pegging the growth rate at zero compared with the $16.4 billion remitted by overseas workers in 2008.

With weakening inflows, the BSP said the gross international reserves would be $37.5 billion to $38.5 billion, slightly lower than earlier projections which placed the expected level at $39 to $40-billion for this year.

But the BSP said the country’s relatively robust external position would allow the economy to tolerate inflationary pressures while supporting sustainable growth trajectory.

The BOP is keenly watched by both credit rating agencies and investors since it was one of the major determinants of the country’s ability to continue servicing its external debt and other payments.

As global consumption slows down, the country’s import-dependent exports would also weaken and this would hit the BOP from two opposing sides: on the one hand, there would be less dollar outflows paying for imported components and on the other, there would also be less inflow from exports.