Forex reserves down to $80.87 B in March

MACTAN ISLAND, Cebu , Philippines  – The country’s foreign exchange buffer thinned in March due to outflows arising from the weaker peso as well as the payments made by the government for its maturing obligations.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. reported yesterday the country’s gross international reserves (GIR) amounted to $80.87 billion in March, $562.9 million lower than the revised $81.44 billion recorded in February.

“The month-on-month decline was due mainly to outflows arising from the BSP’s foreign exchange operations and the payments made by the national government for its maturing foreign exchange obligations,” he said.

Tetangco explained the decline was partially offset by net foreign currency deposits by the national government and revaluation adjustments on the BSP’s gold holdings from the increase in the price of gold in the international market.

Last month’s GIR level was also $2.1 billion lower than the $81.98 billion recorded in March last year.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure that 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 sharp depreciation of the peso. It can also sell to avoid sharp appreciation of the local currency.

Data showed the foreign exchange operations of the central bank yielded $3.69 billion in March, 2.3 percent lower than February’s $3.78 billion.

On the other hand, the value of the BSP’s foreign investments slipped to $67.69 billion in March from the revised $68.2 billion in February.

The value of BSP’s gold holdings inched up to $7.89 billion in March from $7.86 billion in February.

The peso depreciated by around six percent last year making it the second worst performing currency in the region next to the Chinese yuan. It has depreciated this year, hitting a fresh 10-year low of 50.4 to $1 in February due to the normalization of interest rates in the US.

Tetangco said the end-March GIR level could cover 8.9 months’ worth of imports of goods and payments of services and income.

The GIR is also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.

For this year, the BSP sees the GIR hitting $84.7 billion, equivalent to 8.8 months import cover.