BSP downplays drop in forex reserves

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) downplayed the recent drop in the country’s gross international reserves (GIR) saying that the government continues to have a “modest level” of buffers against external shocks.

“The external position remains healthy,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters last Friday.

The country’s foreign exchange reserves went down to a 10-month low of $81.640 billion in June, the BSP reported last Friday.

It marked the third straight month of decline, which was primarily caused by dwindling gold reserves. The BSP has said drop in gold prices abroad had an impact on its holdings of the precious metal.

GIR is an indicator of the country’s ability to pay for imports and debts in foreign currencies.

Reserves last peaked at $85.273 billion in January. The central bank expects GIR to hit a record of $87 billion by yearend.

According to Tetangco, the BSP’s biannual review of its balance of payments (BOP) projections will focus on “new developments,” particularly those in the international market that had an impact on investor sentiment.

BOP forecasts – including that of the GIR – are being reviewed by the monetary authorities every April and November.

“The external position continues to be sound given that despite the downturn in the advanced economies and volatility in the financial markets, we continue to post surplus,” Tetangco pointed out.

Since 2005, the country’s BOP - the broadest gauge of external health of an economy - remained on a surplus, indicating more than enough dollars to meet trade and foreign debt obligations.

As of May, the BOP registered a surplus of $1.884 billion, data showed. The central bank expects a BOP surplus of $4.4 billion by yearend.

Tetangco said a surplus in the BOP – driven mainly by remittances and business process outsourcing earnings – indicate more dollars are entering, which in turn, add up to the GIR. “Our reserves remain at a modest level,” he said.