The country’s gross international reserves declined to a seven-month low of $106.76 billion in April from $107.31 billion on government’s payment of foreign debt and a decrease in the value of gold in the global market, the Bangko Sentral ng Pilipinas said over the weekend.
It said the latest GIR level still represented a more than adequate external liquidity buffer equivalent to 9.4 months’ worth of imports of goods and payments of services and primary income.
It was also about seven times the country’s short-term external debt based on original maturity and 5.5 times based on residual maturity.
“The month-on-month decrease in the GIR level reflected mainly the national government’s foreign currency withdrawals from its deposits with the BSP as the the national government settled its foreign currency debt obligations and paid for various expenditures as well as the downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said in a statement.
Net international reserves, which refer to the difference between the BSP’s reserve assets and reserve liabilities (short-term foreign debt and credit and loans from the International Monetary Fund), decreased by $560 million to $106.74 billion as of end-April from $107.3 billion a month ago.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the end-April GIR was the lowest in seven months since the $106.59 billion in September 2021.
He said the other reason for the decline in GIR was the “increased volatility in the global financial markets largely due to Russia’s invasion of Ukraine since February 24, 2022, and more hawkish Federal Reserve signals in terms of more aggressive rate hikes to curb elevated inflation.”
“For the coming months, the country’s GIR could still increase and potentially post new record highs amid the continued growth in the country’s structural inflows from OFW remittances, BPO revenues, foreign tourism revenues as well as foreign investment inflows, most of which are among record highs/pre-pandemic highs recently,” Ricafort said.
Julito G. Rada
He said near record-high GIR and prospects of reaching new record highs in the coming months could further strengthen the country’s external position, which is a key pillar for the country’s continued favorable credit ratings for the second straight year, mostly at 1-3 notches above the minimum investment grade.
Ricafort said this was “a sign of resilience despite the COVID-19 pandemic that caused downgrades in other countries around the world.”
The GIR hit $108.8 billion as of end-2021, down from the record $110.1 billion in 2020.
The BSP expects GIR to settle at $108 billion by end-2022.