Philippines' foreign reserves dip to $103.4B in July

The Philippines’ gross international reserves (GIR) declined in July to $103.378 billion, down from $104.744 billion in June and $105.418 billion in July last year, according to data released by the Bangko Sentral ng Pilipinas (BSP) on Friday. GIRs, which are eligible foreign assets including securities, currency and deposits, reserve position in the fund, gold, special drawing rights, and other reserve assets held by the central bank, are a measure of the country’s ability to settle import payments and service foreign debt. The BSP stated that these reserves provide sufficient foreign currency to meet the country’s import needs, service its external debt obligations, and serve as a buffer against external economic shocks. The central bank attributed the decrease in reserves mainly to the BSP’s net foreign exchange operations, the national government’s drawdowns on its foreign currency deposits with the BSP for external debt service, and the national government’s net foreign currency withdrawals from its deposits with the BSP. This decline was partly offset by upward valuation adjustments in the BSP’s gold holdings due to the increase in the price of gold in the international market, and the BSP’s net income from its investments abroad. The latest foreign reserves level is estimated to cover up to 6.7 months' worth of imports of goods and payments of services and primary income. It can also cover about 3.6 times the country's short-term external debt based on residual maturity. Short-term debt based on residual maturity refers to the sum of outstanding external debt with original maturity of one year or less, and principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months. By convention, GIR is considered adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income. The GIR level is also deemed adequate if, as of a given period, it is at least equal to 100% of a country’s total short-term external debt—public and private—falling due within the next 12 months.