The country’s foreign-currency reserves depleted further in October to only $79.296 billion, representing a low point in more than two years, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
Servicing the maturing foreign obligations of the national government and the eroded value of the central bank’s gold holdings pulled the country’s dollar buffers down from $79.556 billion the previous September.
The October gross international reserve (GIR) was also a $261-million decline from last month’s accumulated reserves, and an even larger drop of $4.312 billion from last year’s $83.607 billion.
This represented the country’s thinnest reserves in 28 months, or since June 2012, when the buffer against an illiquid global market stood at $76.13 billion.
According to the BSP, there was a substantial drop in the value of the central bank’s gold holdings in October that was magnified by lower returns from foreign-exchange operations.
In particular, the GIR’s foreign-exchange operations fund slumped to $311.7 million from the previous month’s $1.207 billion.
As a matter of practice, the central bank observes a market-determined foreign-exchange framework but, historically, has not hesitated to “maintain strategic presence in the foreign-exchange market” from time to time to smoothen out volatilities.
The peso weakened and traded within the P44-territory in October this year on the back of the dollar’s resurgent strength during the month.
Its gold holdings fell by $257.8 billion from the previous month’s $7.57 billion, totaling $7.3 billion in October.
Income from the BSP’s foreign investments hit $69.832 billion in October, $856.4 million lower than the previous month’s $68.936 billion in September. “The decrease in reserves was due mainly to revaluation adjustments in the BSP’s gold holdings and payments for maturing foreign-exchange obligations of the national government,” BSP Governor Amando M. Tetangco Jr. said.
The BSP also maintained that the level of reserves remain ‘ample’ as this can cover 10.8 months’ worth of imports of goods and payments of services and income. It was also equivalent to 8.2 times the country’s short-term external debt based on original maturity, or six times based on residual maturity.
The BSP previously aimed for the GIR to accumulate as high as $83.5 billion by the end of the year.
This assumption is subject to review and revision seen happening this month.