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Philippines: Dollar reserves slip below $100 billion anew
MANILA, Philippines — The country’s foreign exchange buffer slipped below $100 billion in February, ending four consecutive months of increases, according to the Bangko Sentral ng Pilipinas (BSP).
Data released by the BSP on Tuesday night showed the country’s gross international reserve (GIR) level declined by 1.3 percent to $99.31 billion in February after hitting a seven-month high of $100.66 billion in January from $96.15 billion in December.
The buffer increased steadily from $93 billion in September to above $100 billion in January.
BSP Governor Felipe Medalla said that the month-on-month decrease in the GIR level in February reflected mainly the national government’s net foreign currency withdrawals from its deposits with the central bank to settle its foreign currency debt obligations and pay for its various expenditures.
Medalla also traced the decline to the 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 value of the central bank’s gold holdings went down by 4.8 percent to $9.33 billion in February from $9.8 billion in January.
Despite the decline in the foreign exchange buffer, the BSP said the level was equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.
The figure was also about 6.1 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.
“The latest GIR level represents a more than adequate external liquidity buffer,” Medalla said.
The GIR is the sum of all foreign exchange flowing into the country and serves as buffer to ensure that it will not run out of foreign exchange that it can use in case of external shocks.
The BSP dipped into the reserves to actively intervene in the foreign exchange market as the peso slumped by as much as 15.7 percent to an all-time low of 59 to $1 in October from the end-2021 level of 50.999 to $1.
The central bank has so far raised key policy rates by 400 basis points, which brought the overnight reverse repurchase rate to a 16-year high of six percent from an all-time low of two percent to stabilize the peso and tame inflation.
This helped the local currency bounce back to the 53 to $1 range early last month.
Inflation accelerated to 5.8 percent last year from 3.9 percent in 2021, exceeding the BSP’s two to four percent target. It averaged 8.6 percent in the first two months of this year despite easing slightly to 8.6 percent in February from a 14-year high of 8.7 percent in January.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the GIR could still be supported by the continued growth in structural inflows including remittances from overseas Filipino workers, business process outsourcing revenues, exports, relatively fast recovery in foreign tourism revenues particularly from Chinese tourists, as well as continued inflow of foreign direct and portfolio investments.
After hitting an all-time high of $110.12 billion in 2020, the buffer steadily declined to $108.79 billion in 2021 and $96.15 billion in 2022.
After exceeding the $93 billion target last year, the BSP expects the GIR to settle at $93 billion this year.
Source: https://www.philstar.com/business/2023/03/09/2250245/dollar-reserves-slip-below-100-billion-anew