Keeping the local currency’s competitive edge took its toll on the country’s dollar reserves, whose level went down for the second consecutive month in July, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
The gross international reserves (GIR) showed a diminution to only $80.786 billion, significantly lower compared to both the previous month’s and the previous year’s level.
Compared to the previous month, the July GIR was some $530 million lower than the $81.32 billion reported in June. Compared against the previous year, it was $4.72 billion weaker than gross reserves of $85.51 billion in the same month last year.
Despite the decline, the BSP gave assurance the gross foreign-currency reserves should still be enough to cover 8.6 months worth of imports of goods and payments of services and primary income.
It was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.
The BSP attributed the decline in foreign-currency reserves to outflows arising from the BSP’s foreign-exchange operations.
In July the local currency traded weaker versus the dollar, averaging only P50.638 against the greenback, according to data from the central bank. This was weaker than the previous month’s P49.85-per-dollar average.
BSP Governor Nestor A. Espenilla Jr. earlier acknowledged having “actively managed” so-called volatilities in the foreign-exchange market.
The central bank endeavors to keep a market-determined foreign-exchange framework where the players “dictate” the rate of exchange, even as the BSP “maintains an strategic presence” to smoothen exchange rate dips and surges.
This mechanism is called managed float by economists.
The BSP also said payments made by the national government for maturing foreign-currency obligations played a role in the decline of the country’s gross reserves.
The decline could have been larger were this not partially offset by so-called revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market and net foreign-currency deposits by the national
government.