Gov’t debt payments, gold price drop trim PH’s dollar stash in June

MANILA, Philippines—The Philippines’ total dollar holdings declined slightly in June as the government repaid some foreign debt and the value of gold, which forms part of the reserves, declined in the international market, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP said its gross international reserves, based on preliminary data, settled at $106.08 billion as of end-June 2021 from the end-May 2021 level level of $107.25 billion.

The BSP said these factors trimmed the government’s dollar stash:

  • Downward adjustment in value of gold holdings as a result of global price decline
  • Foreign currency withdrawals of the national government to pay foreign debts and other expenditures
  • BSP foreign exchange operations

These were partly offset, however, by inflows from the BSP’s income from its investments abroad, the BSP added.

Despite the slight decline, the Philippine central bank said its dollar reserves represent “a more than adequate” external liquidity buffer equivalent to 12.1 months’ worth of imports of goods and payments of services and primary income.

These reserves are also worth about 7.8 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity.

By convention, dollar reserves are considered to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.

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.

According to the BSP, its net international reserves—which refers to the difference between the BSP’s gross dollar holdings and total short-term liabilities—decreased by $1.15 billion to $106.08 billion as of end-June 2021 from the end-May 2021 level of $107.23 billion.

The level of dollar reserves, as of a particular period, is considered adequate, if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period.


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