Forex’s Nov. data show slight drop

The gross international reserves (GIR) level declined to $108.5 billion as of end-November from $111.1 billion in October as the government paid more foreign debt and the central bank’s value of gold holdings fell due to lower global prices.

The Bangko Sentral ng Pilipinas (BSP), however, reported the new GIR level remains more than adequate to cover 7.8 months’ worth of imports of goods and payments of services and primary income.

BSP added it also about 4.3 times the country’s short-term external debt based on residual maturity.

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.

BSP attributed the lower GIR last month to higher external debt by the national government.

According to the Bureau of the Treasury, the government’s external debt already reached P5.13 trillion in October, a 3.5 percent growth from the level in September.

The Treasury said this was driven by peso depreciation against the US dollar, adding P152.90 billion to external debt.

Accordingly, the net international reserves declined by $2.6 billion to $108.4 billion as the BSP’s liabilities, including short-term foreign debt and credit and loans from the International Monetary Fund surpassed the level of reserve assets.

Department of Finance Secretary Ralph Recto said the Marcos administration aims to gradually reduce the country’s debt-to-GDP (gross domestic product) ratio through better collection of tax and non-tax revenues in supporting government projects.

He added the government strives to temper debt payments through borrowing mostly from domestic sources with an ideal 75 percent share compared to 25 percent for external sources.

“There will be no more national government’s global bond offering for the rest of 2024, with $500 million remaining out of the $5 billion programmed for this year. It would instead require more local borrowings as an alternative to finance the budget deficit,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

OFWs to the rescue

Despite the peso hitting P59 per US dollar last month, Security Bank Corp. chief economist Angelo Taningco said the local currency might strengthen this month or hover over manageable levels until next year due to a resilient local and US economy.

“It’s unlikely that it will move up further toward 60. We anticipate in the last two months that the peso will have this historical performance of strengthening because of the remittance inflows during the holidays season,” he said.

According to a Reuter’s survey, investors expect the Federal Reserve to cut its policy rate this month toward a total of 75 basis point-reduction this year and another 75 basis points throughout 2025, signaling a more competent peso as investors diversify funds into high interest-rate debt instruments.

‘It’s unlikely that it will move up further toward 60. We anticipate in the last two months that the peso will have this historical performance of strengthening because of the remittance inflows during the holidays season.’

Apart from increased foreign debt by the national government, the GIR level fell as the value of BSP’s gold holdings decreased due to lower gold prices in the international market.

Online data from Live Price of Gold showed Sunday the spot price for the precious metal continued to decline by 0.03 percent to $2,633.20 from $2,633.96.

In September, BSP said it sold 25.95 tons of gold in the first half of the year as it took advantage of the previous higher prices in the global market to increase the country’s GIR.

Ricafort said strategically selling gold protects the country from financial crises due to “exogenous factors that are beyond the country’s control.”