The country’s gross international reserves (GIR) level, an indicator of capacity to pay the country’s obligations as and when they fall due, eased to USD104.70 billion as of end-June 2024 from the year-ago level of USD105.02 billion.
The reduction, the Bangko Sentral ng Pilipinas said, resulted from payments the national government (NG) made on its foreign currency obligations and the diminution of the value of the country’s gold holdings.
“The month-on-month decline in the GIR level reflected mainly the national government’s payments of its foreign currency debt obligations and downward valuation adjustments in the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said.
Government debt as percent of local output measured as the gross domestic product equals 60.1 percent of GDP in 2023l based on latest data. This has averaged 55.5 percent of GDP from 1990 until 2023.
The GIR level is considered more than adequate external liquidity buffer equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.
It is also about 6.1 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.
As part of its fiscal management program, the national government set aside P1.9 trillion of its budget this year for debt service on both the principal amount and on interest payments. Some P670 billion of the government’s budget this year had been programmed as interest payments.
But analysts have always said the more important metric is not the level of debt viewed as percent of GDP but rather on the country’s standing as a borrower in the global debt market.
In this respect, the country’s credit has been rated investment grade for the first time in 2013 after having been deemed non-investment grade for decades before that.
All three sovereign credit watchers Fitch, Standard and Poor’s as well as Moody’s have rated the country’s foreign-currency IOUs as investment grade with either a stable or positive outlook.
Non-investment grade issuers do not enjoy preferential treatment from foreign creditors in terms of the interest cost on their loans by exacting a premium to compensate for the risk they are taking.
