Philippine dollar reserves inch down in May

MANILA, Philippines — The country’s dollar reserves retreated in May owing to the national government’s foreign currency withdrawals, but these levels remain comfortable according to analysts. 

Data provided by Bangko Sentral ng Pilipinas on Wednesday showed that gross international reserves inched down 0.49% month-on-month to $101.3 billion as of end-May. 

“The month-on-month decrease in the GIR level reflected mainly the National Government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and downward adjustments in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the statement read. 

Foreign reserves are assets held mostly as investments in foreign-issued securities, gold as well as foreign currencies like dollar and euro. Being the lender of last resort, the BSP manages reserves as a stand-by fund to help the economy stay afloat in times of external shocks.

Domini Velasquez, chief economist at China Banking Corp., said that the GIR levels were still comfortable.

“Despite a slight decline in May, the latest GIR data provides comfort that the BSP has ample ammunition to stem excessive volatility and depreciation of the PHP. This is especially crucial given the possibility of another Fed rate hike which would narrow the BSP’s interest rate differential with the Fed to below 100 bps,” she said in a Viber message. 

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, agreed with Velasquez’s assessment. 

“GIR remains at very comfortable levels and should ensure dollar liquidity is more than ample to service short-term requirements of the economy,” he said in a Viber message. 

The BSP noted that the latest GIR level represented an external liquidity buffer equivalent to 7.6 months’ worth of imports of goods, income and payments of services. 

The reserves are 5.9 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity. — Ramon Royandoyan