GIR declines to $83.38B

MANILA, Philippines - A drop in gold holdings pushed the country’s gross international reserves (GIR) slightly lower at $83.380 billion in April, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

GIR, which serves as cushion against external shocks, dipped 0.6 percent from $83.951 billion at the end of the previous month, preliminary data showed.

The central bank has forecast the GIR would reach $86 billion by the end of this year.

Despite the decrease, reserves remain “adequate” to cover 11.8 months worth of imports of goods and services, BSP Governor Amando Tetangco Jr. said in a statement.

The reserves are also equivalent to 9.8 times the country’s short-term foreign liabilities based on original maturity, and 6.3 times based on residual maturity.

“The decline in the reserves level was due mainly to revaluation adjustments on the BSP’s gold holdings arising from the decrease in the price of gold in the international market,” Tetangco explained.

Payments made by the government for its maturing external obligations and withdrawals by the Power Sector Assets and Liabilities Management (PSALM) also contributed to the drop, he added.

The value of gold in BSP’s reserves went down 8.89 percent in April to $9.021 billion from $9.901 billion a month ago, figures showed.

This, as the metal’s price in the world plummeted the most in 30 years despite the weakness of the global economy, when gold is supposed to be the most attractive asset for investors.

Gold, which is the usual safe haven for investors during times of global uncertainty, sold at $1,395 per ounce in the world market last April 15 from a record of $1,920 in September 2011.

At the same time, the World Gold Council has noted that so far this year, the BSP made zero gold purchase from small-scale miners, where bulk of the central bank’s gold holdings come from.

This has been acknowledged by Tetangco, who last week said local purchases have dropped “quite significantly,” following the government’s imposition of taxes on gold sales a year ago.

“These outflows were partially offset by inflows from the foreign exchange operations and income from investments abroad of the BSP as well as foreign currency deposits by (the government),” the BSP chief pointed out.

Reserves invested abroad – which accounted for the bulk of GIR – inched down to $71.322 billion in April from $71.325 billion the previous month, data showed.

Money invested with the International Monetary Fund also rose 1.06 percent to $529.44 million. Reserves still in the form of special drawing rights were steady at $1.257 billion.

On the other hand, BSP’s foreign exchange holdings – a pool of major currencies -- rose 32.47 percent month-on-month to $1.251 billion during the same period, official data showed.

The central bank usually accumulates foreign exchange by buying dollars to temper the peso’s strength. The upshot in currency holdings occurred last month even as the peso depreciated versus the dollar.