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Forex reserves decline to $107.7 billion in November

Lawrence Agcaoili - The Philippine Star
Forex reserves decline to $107.7 billion in November
Preliminary data released by the central bank Friday evening showed the gross international reserves (GIR) reached $107.67 billion in November, slightly lower than the $107.89 billion recorded in October.
STAR / File

MANILA, Philippines — The country’s foreign exchange buffer declined slightly in November  as the national government paid more maturing foreign obligations and as global gold prices drop, according to the Bangko Sentral ng Pilipinas (BSP). 

Preliminary data released by the central bank Friday evening showed the gross international reserves (GIR) reached $107.67 billion in November, slightly lower than the $107.89 billion recorded in October.

 “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 it 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. 

The value of the central bank’s gold holdings went down slightly by 1.4 percent to $9 billion in November from $9.13 billion in October. 

International reserves consist of all foreign exchange flowing into a country and serve as buffer to ensure a country will not run out of foreign exchange it could use in case of external shocks. 

The Philippines has been borrowing heavily from both offshore and onshore creditors to finance its COVID response measures. 

Likewise, the upward adjustment in the value of the central bank’s gold holdings due to the decline in the price of gold in the international market also pulled down the country’s foreign exchange buffer last month.

 Despite the decline, the BSP said the latest GIR level represents more than adequate external liquidity buffer equivalent to 10.2 months’ worth of imports of goods and payments of services and primary income. 

The central bank said the buffer is also about 8.7 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity. 

Last Aug. 23, the Philippines received 1.96 billion special drawing rights (SDR) allocation worth $2.78 billion from the International Monetary Fund (IMF), helping boost the country’s foreign exchange buffer. 

The multilateral lender launched the unprecedented $650 billion SDR allocation to provide additional liquidity to member countries particularly as efforts are exerted to address the COVID-19 crisis. 

IMF member countries could exchange their SDRs for hard currencies with other IMF members. These include the  dollar, euro, Chinese yuan, Japanese yen and the British pound. 

Last Thursday, the BSP   lowered the projected 2021 GIR level to $111 billion from the original  target of $114 billion   and to $112 billion instead of $115 billion for 2022.   

The central bank has been building up its foreign exchange reserves to fend off the impact of the   pandemic. The GIR level hit a record high  of $110.12 billion in December 2020. 

BSP managing director Zeno Ronald Abenoja said the lower GIR level for 2021 is due to the use of reserves to pay foreign currency obligations and various expenditures. 

Abenoja said the latest projection also takes into account the new SDR holdings amounting to $2.8 billion from the multilateral lender. 

Furthermore, Abenoja said the BSP also slashed  the GIR forecast for next year in anticipation of continued national government foreign currency deposits to address the impact of the pandemic and to fast-track its infrastructure program.

BSP

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