GIR falls to 2-yr low, at below $100B in July

THE country’s dollar defenses against potential imbalances fell below $100 billion in July, as the Bangko Sentral ng Pilipinas (BSP) continued to battle excessive fluctuations in the local currency.

Data from the BSP showed that the Philippines’s gross international reserves (GIR) settled at $98.8 billion as of end-July this year. This is the lowest GIR of the country in two years or since July 2020.

It is the fifth consecutive month of decline for the GIR, starting from a level of $107.7 billion at the start of the year.

In a statement, the BSP blamed the month-on-month decrease in the GIR level to the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP to settle its foreign-currency debt obligations and pay for its various expenditures. Also cited as a factor was the downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market.

Breaking down the data, the biggest hit of the GIR came from the decline in the value of its dollar investments—which make up the bulk of the country’s GIR. Foreign investments hit $82.5 billion in July, down from the $84.7 in the previous month.

Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort also said the decline in the country’s GIR “somewhat correlated” with the weaker peso in recent months.

Ricafort also said the country’s GIR could still increase in the coming months, amid the continued growth in the country’s structural inflows from OFW remittances, BPO revenues, foreign tourism revenues and foreign investment inflows.

Despite the decline, the BSP said the country’s GIR still represents a “more than adequate external liquidity buffer” equivalent to 8.3 months’ worth of imports of goods and payments of services and primary income.

Moreover, it is also about 6.9 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity.

The country’s GIR is the level of foreign exchange holdings the Central Bank has during a given period. The GIR is a crucial component of the economy as it is often used to manage the country’s foreign exchange rate against excess volatility.


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