THE Philippines’ foreign currency reserves rose as of end-July while the country’s payments position stood at a deficit, according to data released by the Bangko Sentral ng Pilipinas (BSP).
The central bank reported that the country’s gross international reserves (GIR) amounted to $100 billion in July, up from the $99.4 billion GIR level seen in June.
“The GIR level increased month-on-month, notwithstanding the BOP (balance of payments) deficit in July 2023, due mainly to the upward revaluation adjustments in BSP gold holdings and foreign currency denominated assets,” the BSP said.
The central bank keeps the country’s reserve assets, consisting of foreign investments, gold, foreign exchange, reserve position in the International Monetary Fund, and special drawing rights.
The BSP said the latest GIR level represents 7.4 months’ worth of imports of goods and payments of services and primary income, describing it as a “more than adequate external liquidity buffer.”
“Specifically, it ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the central bank said.
The latest GIR level is also about 5.9 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.
Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.
Meanwhile, the country’s BOP position saw a narrower deficit of $53 million in July, down from the $1.8 billion payments position shortfall recorded in the same month last year.
The BOP consists of a country’s economic transactions with the rest of the world during a specific period, including trade in goods, services, and capital.
A surplus means more funds entered the country, while a deficit means more funds exited.
“The BOP deficit in July 2023 reflected net outflows arising mainly from the national government’s payments of its foreign currency debt obligations,” the BSP said.
Notwithstanding the deficit in July, the year-to-date BOP position registered a surplus of $2.2 billion in the first seven months of the year — a reversal from the $4.9 billion deficit recorded in the same period a year ago.
“Based on preliminary data, this development reflected mainly the improvement in the balance of trade and the sustained inflows from personal remittances, net foreign borrowings by the national government, trade in services, and foreign direct investments,” the BSP said.
Citing preliminary data from the Philippine Statistics Authority’s (PSA) International Merchandise Trade Statistics (IMTS), the central bank said the trade deficit for January to July reached $28 billion, down from the $29.8 billion deficit posted in the same period last year.
For his part, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the latest BOP and GIR figures “could have also been supported by the continued growth in the country’s structural US dollar inflows such as OFW remittances, BPO revenues, exports, foreign investments, foreign tourism revenues, POGO revenues, among others.”
“For the coming months, BOP data could still improve with the continued increase/growth in the country’s structural inflows as the economy reopens further towards greater normalcy, in terms of the continued year-on-year growth OFW remittances, but could still grow further in 2023,” Ricafort said. (GMA Integrated News)
