Forex reserves narrow to $83.5 B in May

MANILA, Philippines – The country’s foreign exchange reserves declined to $83.51 billion in May after increasing for five straight months due mainly to the decrease in the price of gold in the international market as well as debt payments by the national government, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. reported yesterday.

“This level was lower by $230 million than the end-April GIR of $83.74 billion due mainly to the decrease in the price of gold in the international market and payments made by the national government for its maturing foreign exchange obligations,” Tetangco said.

The country’s foreign exchange buffers have been increasing steadily from $80.17 billion in November last year to $83.74 billion in April.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.

If it deems necessary, the BSP buys dollars from the foreign exchange market to prevent the sharp depreciation of the peso against the dollar. It can also sell to avoid sharp appreciation of the local currency.

Data showed the value of BSP’s gold holdings declined 5.6 percent to $7.67 billion in May from $8.15 billion in April.

Tetangco said the decline in the country’s GIR level was partially offset by the central bank’s foreign exchange operations and income from investments abroad.

Income from investments abroad reached $72.15 billion in May, $441 million higher than April’s $71.71 billion.

Tetangco said the end-May GIR level could cover 10.4 months’ worth of imports of goods and payments of services and income.

Tetangco added the figure was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

The country’s foreign exchange reserves reached $80.67 billion last year from $79.54 billion in 2014. The figure was slightly lower than the revised GIR level target of $80.7 billion for 2015.

For this year, the BSP sees the GIR hitting $82.7 billion equivalent to nine months import cover. The full-year GIR target was exceeded as early as March after increasing to $82.98 billion.

The BSP now expects cash remittances from Filipinos abroad growing by four percent this year. It also expects current account surplus of $5.7 billion this year lower than the projected level of $8.9 billion in 2015 due mainly to the expected large increase in the imports of goods, notwithstanding improvements in the services and secondary income accounts.