MANILA, Philippines — Foreign reserves dropped for the third straight month in March after the government paid up foreign obligations using some of its dollars while gold values dropped, the central bank said on Friday.
Gross international reserves totaled as $104.82 billion as of end-March, down 0.34% from the previous month’s level, preliminary data showed. Reserves stood at their lowest in 5 months or since accumulating to $103.8 billion in October 2020.
Despite the decline, the Bangko Sentral ng Pilipinas (BSP) said reserves continued to be “more than adequate” to finance the Philippines’ external obligations like paying debts and buying imports, if needed.
Indeed, as a proportion of the country’s imports that serve as gauge of adequacy, the latest GIR can finance 12 months of shipments of goods and services. Funds were also sufficient to meet foreign liabilities as they were equivalent to 7.5 times the country’s short-term external debt due within 3 to 12 months.
The GIR is composed of foreign currencies, gold, foreign investments as well as monetary placements at the International Monetary Fund tapped in case of emergencies. Last year, while the pandemic was peaking and disrupting economic activity, BSP saw a sustained climb in reserves because of dollar proceeds from government borrowings abroad.
These proceeds, in turn, feed into the reserves when exchanged for pesos. The Philippines ended 2020 with reserves at an all-time high of $110.12 billion, before they slid down since the start of the year. The BSP however does not expect this to persist and sees GIR rising further to $114 billion by yearend.
For March, BSP said a decrease in the market value of gold prompted the revaluation of existing metal holdings included in the GIR, resulting in a net $57-million dip. The government also used some dollars to service its debts.