Dollar reserves good for 8 months import

Similar to the previous months, our GIR has been declining because of servicing foreign debts and lower revaluation of gold prices

August 7, 2022

The country’s gross international reserves (GIR) level settled at $98.8 billion in July 2022, equivalent to 8.3 months’ worth of imports of goods and payments of services and primary income. However, the figure is $2.1 billion less than the $100.9 billion level the previous month.

In a statement, the Bangko Sentral ng Pilipinas data shows that the latest GIR level represents a more than adequate external liquidity buffer equivalent to nearly 6.9 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity.

“The month-on-month decrease in the GIR level reflected mainly the national government’s foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and a downward adjustment in the value of the BSP’s gold holdings because of the decrease in the price of gold in the international market,” the BSP said.

Similarly, the net international reserves (NIR), which refers to the difference between the BSP’s reserve assets (GIR) and reserve liabilities (short-term foreign debt and credit and loans from the International Monetary Fund), decreased by $2 billion to $98.8 billion as of end-July 2022 from the end-June 2022 level of $100.8 billion, data shows.

Chief economist Michael Enriquez of Sunlife Investment Management and Trust Co. told Daily Tribune over the weekend that “similar to the previous months, our GIR has been declining because of servicing foreign debts and lower revaluation of gold prices.”

Moreover, Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said, “the GIR as of July at $98.827 billion, new two-year lows or since July 2020, amid net foreign debt payments, lower value of foreign investments by the government and by Philippine residents after some volatility in the global financial markets recently, and lower value of gold holdings that reflected the decline in world gold price.”

“GIR declined for the fifth straight month by $2.165 billion or 2.6 percent and also declined year-on-year by $10.1 billion or 10.9 percent,” the economist added.

Ricafort also said that since the start of 2022, GIR has already declined by $9.967 billion or 9.2 percent, against $108.8 billion as of end-2021

“The decline in the GIR somewhat correlated with the weaker peso in recent months; but the peso already corrected to the strongest in about a month lately at 55.20; eased from the record high of 56.45 posted on 12 and 14 July, 2022; matching the record highs posted in 2004 and 2005,” he added.

Nevertheless, GIR is still equivalent to 8.3 months of imports or still way above the minimum international threshold of three to four months, thereby could still provide more excellent cushion on the peso exchange rate against any speculative attacks, Ricafort said.


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