By means of Luisa Maria Jacinta C. Jocson, Reporter
The gross inter. of the PhilippinesNational reserves (GIR) fell in late November as the government settled some of its foreign currency-denominated debt, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Preliminary data shows dollar reserves fell 2.4% to $108.5 billion at the end of November, from $111.1 billion at the end of October.
Year on year, gross international reserves increased 5.6% to $102.7 billion.
“The month-on-month decline in the GIR level mainly reflected the net withdrawal of foreign currency by the National Government (NG) from its deposits with the BSP to service its foreign currency debts and pay its various expenses” , the central bank said.
The level of dollar reserves was sufficient to cover approximately 4.3 times the country’s short-term external debt on a residual maturity basis.
The GIR also corresponded to 7.8 months of imports of goods and payments of services and primary income at the end of November.
“By convention, GIR is considered adequate if it can finance at least three months of imports of goods and payments of services and primary incomes into the country,” the BSP said.
Ample currency buffers protect an economy from market volatility and ensure that a country can pay its debts in the event of an economic downturn.
Net foreign currency deposits fell 18% to $1.75 billion at the end of November, compared to $2.14 billion a month ago. It was also disappointing 8.1% compared to $1.91 billion a year ago.
The central bank also attributed the decline in dollar reserves to its “net foreign exchange transactions and downward valuation adjustments in the BSP’s gold stocks due to the decline in gold prices in the international market.”
Gold reserves were valued at $11.03 billion, down 2.9% from $11.35 billion at the end of October. However, it rose 1.9% from $10.82 billion in the same period a year earlier.
November saw the first monthly drop in gold prices since June, following a post-US election sell-off following Donald J. Trump’s victory, Reuters reported.
Spot prices for the precious metal have fallen 5% since hitting a record high of $2,790.15 an ounce on October 31, but are still up 28% so far this year.
BSP data showed that foreign investment reached $91.2 billion at the end of November. This was 2% lower than the previous month’s $93.1 billion, but 6.8% higher than the previous year’s $85.4 billion.
“Similarly, net international reserves (NIR) decreased by US$2.6 billion to US$108.4 billion as of end-November 2024 from the end-October 2024 level of US$111 billion,” the BSP said.
Net international reserves are the difference between the reserves of the BSP or GIR and the reserve requirements, such as foreign debt and short-term credits and loans from the International Monetary Fund (IMF).
The country’s reserve position in the IMF fell 2.3% to $668.2 million, from $683.9 million a month earlier. Year over year, interest rates fell 15.1% from $787.2 million.
Special Drawing Rights – the amount the country can tap from the IMF – rose month on month from $3.8 billion to $3.81 billion.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the lower GIR level was due to the net payment of the maturities of the national government’s foreign debt and other U.S.-denominated obligations.
He also cited the BSP’s net foreign exchange transactions, given the volatility of the U.S. dollar against the peso during the month.
In November, the peso fell to the level of P59 per dollar twice, reaching record lows on November 21 and 26.
“For the coming months, the country’s GIR could still be supported by continued growth in the country’s structural inflows from Overseas Filipino Workers (OFW), BPO (business process outsourcing) revenues, exports and a relatively quick recovery of foreign tourism income.” said Mr. Ricafort.
Remittances typically see an increase in December as OFWs send more money to their families during the holidays.
The latest data from the BSP shows that remittances rose 3.3% to $3.01 billion in September. This brought the January-September total to $25.23 billion, up 3% year-on-year.
The central bank expects remittances to grow by 3% this year.
However, Mr. Ricafort also noted the government’s plan to reduce foreign borrowing to manage exchange rate risks.
The government’s borrowing plan this year has been set at a ratio of 75:25 in favor of domestic sources.
For the period 2025 to 2027, the NG plans to obtain at least 80% of its lending program from domestic sources, and 20% from foreign lenders.
Treasury Secretary Ralph G. Recto has said they aim to reduce the share of external borrowing in the borrowing program.
The BSP expects the country’s GIR to reach $106 billion by the end of 2024.