REMITTANCES and foreign borrowings made by the national government buoyed the country’s Balance of Payments in April, trimming the BOP deficit, according to data from the Bangko Sentral ng Pilipinas (BSP).
BSP data showed the position posted a deficit of $148 million in April 2023, lower than the $415-million BOP deficit recorded in the same month last year.
The data showed the country’s BOP deficit in April 2023 reflected outflows arising mainly from the National Government’s (NG) payments of its foreign currency debt obligations.
“Notwithstanding the deficit in April, the cumulative BOP position registered a surplus of $3.3 billion in the first four months of the year. This level is markedly higher than the $79-million surplus recorded in the same period a year ago,” BSP said.
“Based on preliminary data, the cumulative BOP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the NG, and foreign direct investments,” it added.
Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael Ricafort expects this BOP performance to continue in the coming months on the back of strong remittance inflows, Business Process Outsourcing sector revenues, and tourism receipts, among others.
However, one of main reasons for this expectation is the proposed $2-billion US dollar- or euro-denominated retail bonds to be offered by the national government in the third quarter of 2023.
This was deferred/rescheduled from the second quarter of 2023 and had a tenor of at least 5 years. This is expected to add to the country’s BOP and gross international reserves (GIR).
“For the coming months, BOP data could still be supported by the continued growth in the country’s structural US dollar inflows such as OFW remittances, BPO revenues, foreign investments/FDIs, exports, foreign tourism receipts, among others,” Ricafort said.
The BSP said given the latest BOP data, the GIR level increased to $101.8 billion as of end-April 2023 from $101.5 billion as of end-March 2023.
The latest GIR level represents a more-than-adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.
Moreover, it is also about 6 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.
The BSP explained that the GIR level increased month-on-month, notwithstanding the BOP deficit in April 2023, due mainly to the upward revaluation adjustments in BSP gold holdings and foreign currency denominated assets.
It added that the impact of non-economic transactions such as revaluation adjustments is excluded from the computation of the BOP position.
The central bank also noted that short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.
