PH international reserves near two-year low of $103.4B in July

The Philippines' gross international reserves (GIR) fell to $103.4 billion at the end of July, nearing a two-year low, according to the Bangko Sentral ng Pilipinas (BSP). This represents a 1.2 percent decrease from $104.7 billion in the previous month and is the lowest level recorded since January 2025, when reserves stood at $103.3 billion. The decline pushed the reserve buffer below the central bank's revised year-end forecast of $104 billion. Foreign reserves are crucial for the country, providing a cushion against external shocks, facilitating payments for imports, and enabling the servicing of foreign debt when export earnings weaken or access to overseas financing becomes difficult. Most of the reserves are held in foreign investments, along with gold, foreign-exchange holdings and reserve assets at the International Monetary Fund. An examination of the reserve assets revealed that holdings of foreign debt securities, which constitute the bulk of the reserves, decreased by 6.5 percent month-on-month to $67.3 billion. Conversely, other reserve assets, including overnight investments in the Asia Bond Fund and the Bank for International Settlements Investment Pool, saw a significant rise of 34 percent to $12.1 billion. However, the BSP's foreign-exchange holdings, which encompass time and demand deposits as well as cash, also declined to $1.8 billion, marking a two-month low. The central bank stated that part of this reduction was due to the national government withdrawing dollars from its deposits with the BSP to meet external debt obligations. Furthermore, the BSP has been drawing on its reserves to manage heightened volatility in the peso-dollar spot market. The Philippines' economy is susceptible to global inflationary pressures and geopolitical risks, and the depletion of foreign reserves could signal increased vulnerability to future economic shocks, posing a significant challenge for future economic policy management.