GIR falls to 7-month low as of end-September

The Philippines’ dollar reserves fell to a seven-month low as of end-September due to the National Government’s payment of foreign debt obligations and the drop in gold prices in the global market.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday evening showed gross international reserves (GIR) stood at USD 98.69 billion as of end-September, slipping by 0.8% from USD 99.57 billion as of end-August. It marked the lowest in seven months or since USD 98.22 billion in February.

However, the dollar reserves rose by 6.1% from USD 93 billion as of end-September 2022.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) payments of its foreign currency debt obligations and the downward adjustments in the value of BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said in a statement.

As of end-September, the dollar reserves were enough to cover 5.7 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

It is also equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.

Ample foreign exchange buffers protect the country from market volatility and serve as a guarantee for the economy’s ability to pay its debts in the event of an economic downturn.

The month-on-month increase in foreign exchange (FX) holdings was due to the BSP’s possible intervention in FX operations in September, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail note.

The BSP intervenes in the foreign exchange market to smoothen the volatility.

“The peso came under pressure of late, tracking regional weakness as the US dollar reigned due to expectations for further rate hikes by the Fed,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message.

In September alone, the local unit closed at P56.575 against the dollar on Sept. 29, stronger by only two centavos from its P56.595 finish on Aug. 31.

“Despite this pressure, GIR levels remain sizable, downplaying concerns that GIR is now being ‘depleted,’” Mr. Mapa said.

Based on BSP data, foreign currency deposits rose by 28.4% to USD 827.4 million in September from USD 644.6 million in August. However, it fell by 49.5% from USD 1.64 billion a year earlier.

Meanwhile, buffers in the form of gold were valued at USD 9.79 billion, lower by 4.3% from USD 10.23 billion as of end-August, but still up by 17.5% from USD 8.33 billion a year earlier.

The BSP’s foreign investments stood at USD 83.53 billion as of end-September, slipping by 0.7% from USD 84.13 billion a month earlier. Year on year, it rose by 6.1% from USD 78.71 billion a year ago.

According to the BSP, net international reserves dipped by 0.8% to USD 98.7 billion as of end-September from USD 99.5 billion a month prior.

Net international reserves are the difference between the BSP’s reserve assets (GIR) and reserve liabilities such as short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).

The country’s reserve position in the IMF slid by 1.6% to USD 778.1 million as of end-September from USD 790.4 million as of end-August. However, it rose by 8.7% from USD 716 million as of end-September 2022.       

Special drawing rights (SDRs) — or the amount the country can tap from the IMF — stood at USD 3.77 billion, unchanged from the previous month. It jumped by 4.7% from USD 3.6 billion a year earlier.

“Still relatively high GIR levels… would continue to provide structural support/buffer/cushion for the peso exchange rate, especially greater protection versus any speculative attacks, going forward,” Mr. Ricafort said.

Mr. Ricafort also noted that in the coming months, the country’s dollar reserves could be supported by the sustained growth in remittances, exports, investments, and revenues from foreign tourism and business process outsourcing firms.

“We could see more seasonal inflows related to remittances on top of the foreign borrowing of the government to augment. However, the peso will likely still remain pressed as the dollar is still expected to be strong on the outlook for Fed,” Mr. Mapa said.

“GIR could continue to edge lower as long as the dollar stays strong, but we don’t expect reserves to be depleted anytime soon,” he added.

Last month, the BSP lowered its GIR projection for this year to USD 99.5 billion, down from the previous forecast of USD 100 billion.

The BSP kept its 2024 dollar reserves forecast at USD 102 billion. — By Keisha B. Ta-asan, Reporter