Fresh foreign debt boosts Philippines' dollar reserves in July
MANILA, Philippines — The Philippines’ dollar reserves inched up in July after the government deposited proceeds from its recent global bonds sale.
What’s new
Gross international reserves amounted to $106.55 billion as of end-July, up 0.74% month-on-month, the Bangko Sentral ng Pilipinas reported on Friday.
Why this matters
Foreign reserves are assets managed by the BSP as the lender of last resort. These are mostly investments in gold and foreign currencies that can shield the economy during external shocks.
But the dollar buffers’ ascent since the pandemic hit home last year has been seen as a symptom of economic weakness, as anemic domestic demand discourage pull down imports, which used to be a major driver of dollar outflows prior to the health crisis.
A high GIR level also explains the strength of the peso during the pandemic. But as demand for dollars returns amid a recovery in imports due to easing lockdowns, the local currency has now weakened back to the P50-per-dollar level, a territory not seen in over a year.
Despite the import rebound, the BSP still expects this year’s GIR to hit a record-high $115 billion compared with 2020’s level of $110.1 billion.
What the BSP says
In a statement, the central bank credited the increase last month to “inflows from the National Government’s (NG) net foreign currency deposits with the BSP, which includes proceeds from its issuance of ROP Global Bonds, and upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market.”
In late June, the state sold $3 billion worth of benchmark-sized, US-dollar denominated global bonds as part of its fund-raising activity to bridge a record-wide budget deficit this year. The transaction settled on July 6.
“These were partly offset, however, by the outflows from the NG’s payments of its foreign currency debt obligations and the BSP’s foreign exchange operations,” the central bank added.
Other figures
- The GIR level in July can cover 12.1 months’ worth of imports of goods and payments of services.
- It represented 7.7 times the country’s short-term external debt based on original maturity and 5.1 times based on residual maturity.
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