Debt payments bring Philippines' dollar position back to deficit in September

MANILA, Philippines — Payments made by the national government to settle its maturing foreign debts brought the Philippines’ dollar position back to a deficit in September, the Bangko Sentral ng Pilipinas reported Tuesday.

What’s new

The country’s balance of payments (BOP) position posted a deficit of $412 million in September, reversing surpluses recorded both in the previous month and a year ago.

This, in turn, widened the nine-month BOP deficit to $665 million, a turnaround from $6.88 billion surplus registered in the same period last year.

Why this matters

The BOP is the summary of economic transactions of a country with the rest of the world during a specific period. A surplus occurs when more foreign funds enter the country against those that left while a deficit arises when the reverse happens.

The return to a BOP deficit in September comes at a time domestic demand is healing from a pandemic-induced crash and is starting to drive dollar outflows again. The BSP forecast the Philippines to cap the year with a $4.1-billion BOP surplus that, if realized, would be narrower than $16.0 billion surfeit recorded in 2020.

What the BSP says

In a statement, the central bank attributed the BOP gap in September to the government’s payments of its old foreign loans.

Meanwhile, the BSP said a ballooning trade deficit as imports begin to rise again widened the year-to-date BOP gap. At the same time, the central bank explained that the government borrowed less from external creditors this year compared to last year, translating to fewer dollar inflows.

Other figures

• The September deficit slashed the Philippines’ final gross international reserves (GIR) to $106.6 billion from $107.96 billion as of end-August. Nevertheless, the latest GIR level is enough to cover 10.7 months’ worth of imports.