The country’s capacity to pay for trade obligations and foreign debt has more than doubled as at end-June this year.
According to the Bangko Sentral ng Pilipinas (BSP), the gross international reserves (GIR) stood at $100.6 billion, enough foreign currency, gold, foreign investments, contributions to the International Monetary Fund IMF) and special drawing rights (SDR) to finance 7.5 months’ worth of foreign currency obligations. SDRs are a basket of foreign currency IMF member countries get when taking out loans from the multinational financial institution.
“The latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity,” the BSP said.
Global convention requires for the GIR to equal at least three months, which means Manila has capacity to service its foreign currency obligations without having to borrow the resources to pay for them.
“The month-on-month decrease in the GIR level reflected mainly the national government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and downward adjustments in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said.
As consequence, the net international reserves (NIR), or the GIR less the central bank’s short-term debt, narrowed to only $99.8 billion.
Government debt has dramatically risen the past four years from only 39.6 percent of local output measured as the gross domestic product (GDP) in 2019 to 54.6 percent the following year, then 60.4 percent and finally 60.9 percent in 2022.
