Fresh foreign debts, BSP earnings give Philippines a dollar surplus in July

MANILA, Philippines — Inflows from new foreign debts raised by the government for pandemic response and earnings from the Bangko Sentral ng Pilipinas’ investments abroad gave the Philippines a dollar surplus in July.

What’s new

The country’s balance of payments position climbed posted a $642 million surplus in July, the BSP reported Wednesday.

That was a turnaround from $312 million deficit recorded in June, helping trim the seven-month shortfall to $1.3 billion.

Why this matters

The BOP is the summary of economic transactions of a country with the rest of the world during a specific period. A surplus occurs when more foreign funds enter the country against those that left while a deficit arises when the reverse happens.

For this year, the BSP forecast the BOP surplus to narrow to $7.1 billion, from $16 billion recorded in 2020, but for the good reason that local demand that used to drive dollar outflows is slowly coming back as the economy recovers from a pandemic-led slump.

What the BSP says

The BSP noted that the surplus in July was due to proceeds from the government’s bond sale and income from the central bank’s investments abroad.

In late June, the state sold $3 billion worth of benchmark-sized, US-dollar denominated global bonds as part of its fund-raising activity to bridge a record-wide budget deficit this year. The transaction settled on July 6 and the proceeds were later deposited to the BSP.

Offsetting those inflows were withdrawals made by the government to pay maturing foreign debts and the BSP’s foreign exchange operations. As regulator of the Philippine financial system, the BSP sometimes steps in currency trading to temper the peso’s weakness by dipping into the country’s foreign reserves and selling dollars.

Other figures

• July’s BOP surplus bolstered the country’s gross international reserves to $107.15 billion, enough to cover 12.2 months’ worth of payments of services and imports requirements.