July FX reserves smallest in 7 months

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THE COUNTRY’S international reserves slipped in July to a seven-month low as the central bank tapped the funds to temper foreign exchange swings and the national government paid more debts, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Gross international reserves (GIR) slipped to $80.787 billion last month, smaller than the downward-revised $81.321 billion recorded in June and the $85.506 billion posted in July last year.

The latest figure is also the smallest since December’s $80.692 billion, according to central bank data.

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

The central bank sometimes uses reserve funds to temper swings in peso-dollar trading.

The peso hovered around the P50 level last month, hitting P50.94 against the greenback on July 19 that was the weakest in over 10 years.

BSP Governor Nestor A. Espenilla, Jr. has said the central bank is “actively managing” excessive volatility in the foreign exchange market.

On the other hand, the GIR decline was capped partly by higher gold valuations and additional foreign currency deposits of the government, the BSP said.

Income from the central bank’s offshore investments slipped to $66.945 billion in July from $68.16 billion the preceding month and $73.294 billion a year ago. It accounted for 83% of the total reserve stash.

On the other hand, the value of the central bank’s gold holdings picked up to $8.003 billion, up from $7.835 billion in June but 5.9% less than the $8.505 billion the year prior, reflecting higher gold prices in the international market.

Meanwhile, the BSP’s dollar holdings jumped to $4.208 billion from June’s $3.695 billion and were double July 2016’s $2.08 billion. Central bank officials have said that a weaker peso spelled trading gains, as the reserves are expressed in dollars.

Reserves the Philippines has parked with the International Monetary Fund (IMF) steadied at $452.3 million, marginally less than the $452.8 million a month ago.

Special drawing rights, or the amount which the country can tap under the IMF’s reserve currency basket, stood unchanged at $1.179 billion, the BSP said. The IMF uses the US dollar, the Japanese yen, the euro, the British pound and the Chinese yuan as benchmark currencies to compute a country’s reserve position.

Despite the smaller reserve stash, the foreign currency buffer is still above the central bank’s $80.5-billion estimate for the entire year that had been trimmed from the $84.7-billion projection last year. The latest level is also more than 2016’s actual $80.692-billion GIR.

The latest tally is enough to settle 8.6 months’ worth of import payments, well above the three-month international standard. It can likewise cover 5.5 times the country’s short-term foreign debt based on original maturity or outstanding debt falling due in the next 12 months, and 3.7 times liabilities based on residual maturity or outstanding short-term debt plus principal payments on medium- and long-term loans of the public and private sectors falling due in the next 12 months

International reserves are made up of gold, the BSP’s assets held in foreign currencies, country quotas with the IMF, as well as foreign currency deposits held by government and state-run firms. It is a key measure of a country’s macroeconomic footing, as it serves as the country’s buffer against external financial shocks.

Credit raters have cited the BSP’s hefty reserve stash as a source of strength for the Philippines as they maintained the country’s ratings. — Melissa Luz T. Lopez

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