Phl foreign reserves fall to lowest level since

Phl foreign reserves fall to lowest level since | Daily Tribune

The latest level marked a decline of about $4.85 billion, or 4.6 percent, from the previous month. It was the first time the country’s foreign reserves finished below $100 billion since September 2023, when GIR stood at $98.116 billion.

“The latest monthly decline in the GIR [was] largely brought about by [a] -US$5.5 billion, or -35.4%, month-on-month decline in other reserve assets to US$9.998 billion, and by [the] lower world gold prices by -6.3% month-on-month, which consistently reflected the -6.7%, or -US$1.286 billion, month-on-month decline in gold reserves to US$17.822 billion,” said RCBC chief economist Michael Ricafort.

“[These were] positively offset by higher foreign currency reserves (currency and deposits), by +US$1.545 billion, or +1%, to US$3.083 billion.”

The BSP attributed the drop mainly to its net foreign exchange operations, downward valuation adjustments driven primarily by changes in the prices of its gold holdings and foreign currency-denominated reserve assets, and the national government’s drawdowns and net foreign currency withdrawals from its deposits with the central bank.

Despite the decline, the BSP said the country’s reserves remained sufficient to meet its foreign currency requirements, including imports and external debt obligations, while providing a buffer against external economic shocks.

The end-September GIR was equivalent to 6.3 months’ worth of imports of goods and payments for services and primary income. It could also cover about 3.2 times the country’s short-term external debt based on residual maturity.

The reserve position reached an all-time high of $113.264 billion in February before declining in the succeeding months following the onset of the Middle East conflict in March. GIR stood at $103.317 billion in July and $104.846 billion in August before slipping below the $100-billion level in September.

Ricafort said the country’s GIR position may be affected by volatility in global financial markets, with the Middle East conflict continuing to weigh on investor sentiment in the absence of a peace deal between the US, Israel and Iran.

“Going forward, the country’s GIR could still be supported by the continued growth in the country’s structural inflows from OFW remittances, BPO revenues, exports (though offset by imports), [and] relatively fast recovery in foreign tourism revenues,” he said, noting that the depreciation of the peso – which still remains at the P62 level – “could still require intervention/smoothening of the volatility in the local foreign exchange market as seen recently to help stabilize import prices and overall inflation.”