The GIR reached a 7-month low by the end of September.

Rewritten: This report was written by Keisha B. Ta-asan.

increased to a record high of US$53.61 billion in March

In March, the Philippines’ reserve of US dollars reached a new peak at US$53.61 billion.

The seven-month low in September was caused by the National Government’s repayment of foreign debts and a decrease in gold prices on the global market.

According to the Bangko Sentral ng Pilipinas (BSP), the latest data released on Friday evening revealed that gross international reserves (GIR) were at $98.69 billion by the end of September, representing a 0.8% decrease from $99.57 billion at the end of August. This is the lowest level in seven months, since February’s $98.22 billion.

Nonetheless, the amount of dollar reserves increased by 6.1% to $93 billion as of the end of September 2022.

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The BSP stated that the decrease in the value of BSP’s gold reserves and the NG’s payments towards foreign currency debt were the main factors affecting the economy.

At the end of September, the amount of dollar reserves could cover the country’s short-term external debt 5.7 times based on its original maturity and 3.6 times based on its residual maturity.

This is also the same as having enough for 7.3 months of imports and payments for services and primary income.

Having substantial foreign exchange reserves safeguards the nation against market instability and acts as a assurance for the economy’s capability to repay its debts in the case of an economic downturn.

According to an email note from Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, the rise in foreign exchange (FX) holdings from the previous month can be attributed to the possible involvement of the BSP in FX operations during September.

The BSP takes action in the foreign exchange market in order to minimize fluctuations.

The peso has been experiencing pressure recently, following the trend of weakening currencies in the region. This is due to the strength of the US dollar, which is expected to continue due to anticipated rate increases by the Federal Reserve. According to Nicholas Antonio T. Mapa, a senior economist at ING Bank N.V. Manila, this was conveyed through a Viber message.

In the month of September, the domestic currency ended at P56.575 against the US dollar on September 29, showing a slight increase of two centavos from its previous value of P56.595.finish on Aug. 31.

“Despite the pressure, there is still a significant amount of GIR, alleviating worries that it is being exhausted,” stated Mr. Mapa.

According to data from BSP, there was a 28.4% increase in foreign currency deposits in September, reaching $827.4 million compared to $644.6 million in August. However, this amount decreased by 49.5% from $1.64 billion in the same period last year.

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The value of gold reserves decreased by 4.3% to $9.79 billion at the end of August, compared to $10.23 billion. However, it still showed a 17.5% increase from $8.33 billion in the previous year.

As of the end of September, the foreign investments of the BSP totaled $83.53 billion, a decrease of 0.7% compared to the previous month’s $84.13 billion. However, there was a 6.1% increase from the $78.71 billion recorded a year ago.

The BSP reported that the net international reserves decreased by 0.8% to $98.7 billion at the end of September, down from $99.5 billion the previous month.

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 IMF reported that the country’s reserve position decreased by 1.6% to $778.1 million at the end of September, compared to $790.4 million at the end of August. Conversely, there was an 8.7% increase from $716 million at the end of September 2022.       

SDRs, which represent the funds available to a country through the IMF, remained at $3.77 billion in the current month, with no change from the previous month. This marks a 4.7% increase from the amount of $3.6 billion recorded in the same month last year.

According to Mr. Ricafort, the current levels of GIR remain relatively high which will serve as a support and cushion for the peso’s exchange rate. This will also offer better protection against any potential speculative attacks in the future.

According to Mr. Ricafort, the country’s dollar reserves could potentially receive a boost in the upcoming months due to continued growth in remittances, exports, investments, and income from foreign tourism and business process outsourcing.firms.

According to Mr. Mapa, there may be an increase in seasonal inflows from remittances, in addition to the government’s foreign borrowing, to supplement the economy. However, the peso is expected to continue facing pressure due to the strength of the dollar and the forecast for the Federal Reserve.

The dollar’s strength may cause GIR to decrease, but there is no immediate concern for reserves to run out, according to the speaker.

In the previous month, the BSP decreased its estimate of the GIR for this year to $99.5 billion, which was previously predicted to be $100 billion.

The BSP maintained its prediction that the dollar reserves for 2024 will remain at $102 billion.