THE Bangko Sentral ng Pilipinas (BSP) reported on Tuesday that the country’s dollar defenses declined in June this year, but remained “more than adequate” for the country’s external liquidity needs.
The central monetary authority said Philippine gross international reserves (GIR) hit $106.8 billion in June this year, down by some $450 million from the previous month’s level.
Compared to its level in end-June 2020, the current GIR level is $13.33 billion higher than the $93.47 billion level during the period.
The country’s GIR is the level of foreign exchange holdings being managed by the Central Bank 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.
The Philippines’s GIR has been rising steadily for the whole of 2020 amid the pandemic, as the local currency remained strong against the US dollar.
While the GIR settled slightly at the end of the first half of the year, the BSP said this level remains more than adequate external liquidity buffer equivalent to 12.1 months’ worth of imports of goods and payments of services and primary income.
It is also about 7.8 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity.
The BSP attributed the GIR month-on-month decline to 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, foreign currency withdrawals of the national government (NG) from its deposits with the BSP to pay its foreign currency debt obligations and various expenditures, and BSP’s foreign exchange operations.
Data showed that the country’s gold holdings declined to $8.87 billion in June this year down from the $9.9 billion level in the previous month.
The decline could have been larger, the BSP said, if not partly offset, however, by the inflows from the BSP’s income from its investments abroad.
In its statement on Monday, Fitch Ratings said the Philippines’ external finances remain a “credit strength” for the economy.