Dollar reserves retreat as government paid foreign debts

MANILA, Philippines — The Philippines’ dollar reserves were trimmed in February after some of the funds were used to bankroll foreign currency debt payments.

In a statement on Tuesday, the Bangko Sentral ng Pilipinas reported the gross international reserves settled at $99.3 billion as of end-February. This was lower by 1.4% month-on-month. 

The central bank attributed the retreat to debt payments and the declining value of gold.

READ: Government debt stock fattens in January

“The month-on-month decrease in the GIR level reflected mainly the National Government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and downward adjustments in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the statement read.

Foreign reserves are assets held mostly as investments in foreign-issued securities, gold as well as foreign currencies like dollar and euro. Being the lender of last resort, the BSP manages reserves as a stand-by fund to help the economy stay afloat in times of external shocks.

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said the dip in reserves was expected.

“GIR dips after government settles obligations, valuation of holdings as well as a possible result of monetary operations,” he said in a Viber message. 

The BSP noted that the latest GIR level represented an external liquidity buffer equivalent to 7.5 months’ worth of imports of goods, income and payments of services.

The reserves are 6.1 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

“Despite the dip, GIR remains more than ample to settle short-term obligations despite outsized fears of depletion,” Mapa added. — Ramon Royandoyan