The country’s foreign-currency cushion helping keep the economy afloat in turbulent times significantly thinned in November, the result of the central bank’s foreign- exchange operations and of lower prices of gold that slashed some $2 billion off the country’s forex reserves.
The Bangko Sentral ng Pilipinas (BSP) reported on Wednesday a $2.37-billion decline in the country’s gross international reserves (GIR) in November, from the previous month, bringing the reserves to only $82.734 billion, from the $85.105 billion in October.
While the forex reserves in November were $2.56 billion higher than the level in November last year, it proved the lowest since February this year, when it aggregated $81.877 billion.
The central bank manages the GIR to help it underwrite the country’s foreign-currency obligations. The reserves also serve as a cushion against external-sector imbalances and such other global events that materially impact the economy.
Gold reserves, so-called special drawing rights (SDR), foreign investments and foreign-exchange reserves comprise the country’s GIR. Maintaining a high level of reserves is an import economic endeavor, as it relates to the country’s capacity to pay maturing forex obligations.
“The decline from October to November was due mainly to outflows arising from the foreign-exchange operations of the BSP, 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,” the central bank said.
The central bank’s gold holdings fell from $8.13 billion in October to only $7.402 billion in November. Its foreign investments for the month, meanwhile, hit $69.5 billion, down from $71.63 billion the previous month.
The decline could have been larger, according to the central bank, were it not partially offset by the national governmen’s foreign-currency deposits.
Despite the decline, the central bank said the GIR remained sufficient to cover 9.6 months’ worth of imports of goods and payments of services and income. This was 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.