BOP returns to surplus as government borrowed more

MANILA, Philippines — The balance of payments (BOP) returned to a surplus in July, ending two straight months in deficit, as the national government borrowed more from abroad to augment its COVID-19 war chest.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the $642-million surplus last month was a reversal of the $312-million shortfall in June and higher than the $8-million surplus in July last year.

BSP Governor Benjamin Diokno said last month’s surplus reflected mainly the national government’s net currency deposits with the central bank amounting to $1.34 billion as well as the BSP’s earnings from its investments abroad worth $157 million.

The Philippines raised $3 billion after it returned to the offshore debt market via a dual-tranche dollar-denominated global bond offering. The 25-year bonds worth $2.25 billion and the 10.5-year bonds amounting to $750 million were settled last July 6.

The net foreign currency deposit of the national government in the BSP was computed by deducting its withdrawals amounting to $1.68 billion from deposits worth $3.02 billion arising from fresh loans from foreign creditors.

Diokno said the inflows in July were partially offset by the payment of its foreign currency debt obligations by the national government amounting to $465 million as well as the central bank’s net foreign exchange operations worth $398 million.

The BOP is the difference in total values between payments into and out of the country over a period. A surplus means more dollars flowed into the country from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing earnings and tourism receipts compared to the amount used to pay for the importation of more goods, services and capital.

The BSP chief said the strong inflows helped reduce the cumulative BOP deficit to about $1.3 billion in end-July from $1.94 billion in end-June.

However, the shortfall in the first seven months was a complete reversal of the $4.12-billion surplus booked in the same period last year.

“Based on preliminary data, this cumulative BOP deficit was partly attributed to a wider merchandise trade deficit,” Diokno said.

Latest data from the Philippine Statistics Authority showed the country’s trade deficit ballooned by 53 percent to $17.5 billion from January to June compared to $11.4 billion in the same period last year as trade recovers with the reopening of the global economy from a major shutdown caused by the  pandemic.

From January to June, imports surged by nearly 30 percent to $53 billion, while exports grew by 21 percent to $36 billion.