By Katherine K. Chan, Reporter
THE PHILIPPINES’ dollar reserves shrank to their lowest level in almost four years at end-October as the peso’s depreciation continued to weigh on the central bank’s foreign exchange (FX) operations.
As of end-October, the country’s gross international reserves (GIR) stood at $97.35 billion, declining 11.7% from $110.249 billion a year ago, preliminary Bangko Sentral ng Pilipinas (BSP) data showed.
This was the lowest GIR level in nearly four years or since the $96.149 billion recorded as of end-December 2022.
The dollar reserves likewise slipped by 2.15% from the three-year low of $99.494 billion as of end-September.
According to the BSP, its dollar reserves declined due to its net foreign exchange operations and downward valuation adjustments from lower global gold prices.
The GIR also fell after the National Government’s net withdrawals from its foreign currency deposits with the BSP in order to pay its external debts. Total withdrawals exceeded its deposits during the month, the central bank added.
International reserves are the central bank’s foreign assets held mostly as investments in foreign-issued securities, foreign exchange and monetary gold, among others.
These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDRs).
Based on BSP data, its gold holdings inched up by 0.37% to $16.953 billion as of end-October from $16.89 billion in the prior year. However, it slipped by 4.88% month on month from $17.822 billion.
The central bank’s foreign currency-denominated securities also declined by 20.93% to $62.836 billion in the period ending October from $79.47 billion a year ago and by 1.74% from $63.951 billion as of end-September.
On the other hand, the BSP’s foreign currency and deposits surged by over 15-fold (1,445.28%) year on year to $3.648 billion from $236.1 million and by 18.41% from $3.081 billion a month ago.
Meanwhile, the BSP’s reserve position in the IMF stood at $755.1 million as of end-October, up 3.69% from $728.2 million a year earlier and 4.43% from $723.1 million as of end-September.
Its SDRs — or the amount the Philippines can tap from the IMF’s reserve currency basket — edged up by 0.38% to $3.921 billion from $3.906 billion in the same period last year. However, it dipped by 0.27% from end-September’s $3.931 billion.
Central bank data also showed that its other reserve assets amounted to $9.237 billion in the 10-month period, up 2.43% from $9.019 billion in the previous year but down 7.49% from $9.985 billion.
‘AMPLE BUFFERS’
Meanwhile, the central bank noted that it continues to hold ample external buffers for the country despite the significant decline in its GIR.
“Notwithstanding the decline, the latest GIR level remains an adequate external liquidity buffer, providing sufficient foreign currency to meet the country’s import needs and service its external debt obligations,” the BSP said in a statement late on Friday.
Its end-October reserves could cover about 3.1 times the country’s short-term external debt based on residual maturity.
It likewise translates to 6.1 months’ worth of imports of goods and payments of services and primary income, more than double the three-month standard.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion noted that the central bank’s efforts to smoothen out sharp swings in the FX market were partly behind the lower GIR at end-October, especially as the peso further weakened last month.
“Peso weakness is partly behind the GIR decline as the BSP manages excessive FX volatility,” he said in a Viber message. “The buffer remains adequate, but persistent currency pressure could lead to further reserve drawdowns.”
While the nearly 12% annual decline in GIR “bears watching,” its current level can still cushion the country’s external position, Mr. Asuncion added.
“More important than the absolute level is the pace and persistence of the drawdown, particularly if accompanied by sustained peso pressure,” he said. “For now, the external buffer remains adequate, but continued reserve losses could gradually reduce the BSP’s room to manage external shocks and excessive FX volatility.”
From the P58- to P59-a-dollar level prewar, the local unit breached the P64 handle in October after breaking multiple all-time lows. It hit a historic trough of P64.17 against the greenback on Oct. 27, marking the seventh straight trading day that it finished at a record low.
The peso averaged P63.0996 per dollar in October, 8.24% or P4.8012 weaker than its P58.2984 average a year ago, BSP data showed.
The BSP uses the country’s foreign reserves by releasing US dollar liquidity when intervening in the foreign exchange market amid episodes of peso depreciation.
Earlier this month, BSP Governor Eli M. Remolona, Jr. noted that they consider sharp peso depreciation unfavorable as it affects the country’s inflation, adding that they “go in and out” of the FX market.
Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the drop in the GIR could become more concerning if it undershoots the level needed to cover six months of imports or signals continued pressure on the country’s external financing.
“For now, it’s more of a yellow light than a red light, but sustaining remittances, exports, tourism, and investment inflows remains critical,” he added.
The BSP expects its foreign reserves to settle at $104 billion by the end of the year from the $110.8 billion it held in 2025.
