BSP dollar reserves decline in May

The central bank’s dollar reserves plummeted in May as the government withdrew foreign currency to repay it.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that gross international reserves (GIR) fell 0.67 percent to $ 106.978 billion at the end of May, from $ 107.705 billion recorded at the end of April.

However, that figure was 14.7% higher than the $ 93.288 billion in currency buffers recorded at the end of May 2020.

“The month-over-month decline in the GIR level reflects outflows mainly due to the national government’s foreign currency withdrawals from its deposits with the BSP to pay its foreign currency obligations and various expenses,” the central bank said in a press release on Friday.

This was partially offset by inflows from BSP’s income from foreign investments and foreign exchange operations. Rising gold prices on the international market also boosted the valuation of BSP’s gold holdings.

ING Bank-NV Manila senior economist Nicholas Antonio T. Mapa said the country’s decline in dollar reserves also reflected the local stock market exits during the month.

“The BSP buffer stock of foreign currencies edged down in May as the currency weathered a period of depreciation associated with strong foreign sales in the local stock market,” Mapa said in a note.

A sufficient level of currency buffers protects an economy from market volatility and ensures that the country is able to pay its debts in the event of an economic downturn.

The accumulation of BSP reserves follows the trend of other Asian central banks which learned to increase their reserves after the Asian financial crisis.

“Malaysia, Thailand, Indonesia and the Philippines have not only replenished their reserves, but have even erected large foreign exchange walls to ensure that the currency flows and that the potential destabilizing episodes of the past never happen again. “said Mr. Mapa.

At its end-May level, Philippine dollar reserves are sufficient to cover 12.2 months of imports of goods and payments for services and primary income.

It was also equivalent to about 7.4 times the country’s short-term external debt on an original maturity basis and 5.1 times on a residual maturity basis.

Foreign currency deposits in May fell 53.7% to $ 2.393 billion from 5.173 billion in April and were also 13% lower from $ 2.744 billion a year earlier.

At the same time, foreign investment rose 1.59% to reach $ 92.64 billion in May, from $ 91.188 billion the previous month and 14.8% from $ 80.676 billion in May 2020. .

BSP’s gold holdings were valued at $ 9.907 billion, 6.41% higher than April’s $ 9.31 billion and 23.6% higher than $ 8.015 billion a year ago. a year.

The reserve position at the International Monetary Fund (IMF) also increased 0.5 percent to $ 807.9 million from $ 803.8 million a month ago and 19.3 percent from 677.2 million. million dollars saved last year.

Special Drawing Rights – or the amount the country can draw from the IMF – stood at $ 1.229 billion for the second month in a row. It was up 4.6% from $ 1.174 billion in May 2020.

BSP predicts that GIR will reach $ 114 billion this year. The country’s reserves hit a record high of $ 110.117 billion at the end of December 2020. – Luz Wendy T. Noble

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