THE PHILIPPINES are gross belownational reserves (GIR) fell 0.3% month-on-month in June, which the Bangko Sentral ng Pilipinas (BSP) governor partly attributed to his intervention in the foreign exchange market amid the continued depreciation of the peso against the US dollar.
Preliminary data from the BSP showed gross dollar reserves at $104.7 billion at the end of June, down slightly from $105.02 billion at the end of May.
Year over year, dollar reserves rose 5.3% to $99.39 billion.
“The month-on-month decline in the GIR level reFmainly the payments by the National Government (NG) of its foreign currency debt obligations and downward valuation adjustments of BSP gold stocks due to the decline in gold prices in the international market,” the central bank said.
BSP Governor Eli M. Remolona, Jr. said the decline in the GIR level at the end of June was partly due to the central bank’s intervention in the foreign exchange market as the peso continued to weaken against the US dollar.
“It’s not all of it, but part of it,” he told reporters late Friday. “As I said before: we do not want the peso to depreciate very sharply. We do not have a target level for the peso. We just don’t want the price to drop significantly in value.”
The peso fell to P58.61 against the dollar as of end-June from P58.51 at the end of May. The local unit has been trading at P58 per dollar since May.
At the end of June, the level of dollar reserves was sufficient to cover approximately 6.1 times the country’s short-term external debt based on the original maturity and 3.8 times based on the remaining maturity.
It also corresponded to 7.7 months of imports of goods and payments for services and primary income.
Ample currency buffers protect an economy from market volatility and ensure the country can pay its debts in the event of an economic downturn.
Broken down, the central bank’s foreign investment fell 0.04% to $89.49 billion at the end of June, compared with $89.52 billion in the previous month. On the other hand, investments rose 7% year-on-year from $83.66 billion.
Gold reserves were valued at $9.9 billion, down 1.1% from $10.02 billion at the end of May and down 1% from $10.01 billion a year ago.
Net foreign currency deposits fell 17.8% to $790.6 million at the end of June, compared to $962.3 million a month earlier. It also fell 31.9%, compared to $1.16 billion at the end of June 2023.
Net international reserves fell 0.3% to $104.69 billion at the end of June, from $104.98 billion at the end of May.
The net international reserves are the diFbetween the BSP’s reserves (GIR) and reserve requirements, such as short-term foreign debt and International Monetary Fund (IMF) credits and loans.
Meanwhile, the country’s reserve position in the IMF rose 0.4% to $740.4 million at the end of June, from $737.2 million at the end of May.
The Special Drawing Rights, or the amount the country can tap from the IMF, remained unchanged at $3.77 billion.
“The BSP has previously (said) that the agency is actively but not overtly intervening in the market not only to stabilize the value of the Philippine currency but also to counter the inflation associated with its depreciation,” Leonardo A .Lanzona, Jr. ., an economics professor at Ateneo de Manila University said in an email.
Mr Lanzona said the problem with this intervention is that it leads to greater dependence on imports.
“These may also lead to short-term speculative investments instead of long-term investments that could improve domestic production capacity,” he added.
Meanwhile, Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said that despite the month-on-month decline, the GIR level has remained above $100 billion for the ninth straight month, which is a “good signal.”
“In the coming months, the country’s GIR could continue to be supported by the continued growth of the country’s structural economyFlows due to remittances from Filipino workers abroad, revenues from business process outsourcing, exports (although offset by imports), relatively quick recovery in foreign tourism revenues, as well as continued foreign investment/FDI inFLows come from pre-pandemic highs,” he added.
The BSP expects the GIR level to reach $104 billion by the end of the year. — Luisa Maria Jacinta C. Jocson