Nov forex reserves lowest in 9 months

MANILA, Philippines - The country’s foreign exchange reserves declined to $82.73 billion in November, the lowest level since February, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said the November level was also $2.38 billion lower than the October level of $85.11 billion.

Tetangco attributed the decline to outflows arising from the foreign exchange operations of the central bank, revaluation adjustments on the BSP’s gold holdings resulting from the decrease in the price of gold in the international market, and payments made by the national government for its maturing foreign exchange obligations.

Tetangco said the decline was partially offset by the national government’s net foreign currency deposits along with the BSP’s income from investments abroad.

The value of the central bank’s gold holdings declined nine percent to $7.4 billion in November from $8.13 billion in October while earnings from foreign exchange operations booked a double-digit growth of 13.1 percent to $4.22 billion from $3.73 billion.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.

If it deems necessary, the BSP buys dollars from the foreign exchange market to prevent a sharp depreciation of the peso against the dollar.

Despite the decline, Tetangco said the end-November GIR level could cover 9.6 months’ worth of imports of goods and payments of services and income.

He added the GIR is also equivalent to 5.9 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.

For this year, the BSP expects the GIR at $82.7 billion equivalent to nine months import cover.

Global financial markets remained volatile due to the impending interest rate hike in the US as well as the uncertainties about the policies of US president-elect Donald Trump.

Late last month, the peso momentarily breached the 50 to $1 level but still managed to recover to close at a fresh eight-year low while the Philippine Stock Exchange index plunged as foreign investors continued to withdraw their investments amid the negative sentiment.