THE PHILIPPINES’ gross international reserves (GIR) decreased in July due to lower gold values and as the government repaid a larger portion of its external debt, preliminary data from the central bank revealed.
The Bangko Sentral ng Pilipinas (BSP) announced on Thursday that dollar reserves fell by 0.3% to $105.7 billion at the end of July from $106 billion at the close of June.
Year-on-year, the GIR decreased by 1% from $106.74 billion.
The central bank indicated that the drop was primarily due to “lower international gold prices and the National Government’s withdrawals from its foreign currency reserves with the BSP to meet external debt commitments.”
Sufficient foreign exchange reserves shield the nation from market fluctuations and guarantee that it can meet its debts during economic downturns.
The central bank asserted that the current GIR presents “a strong external liquidity cushion.”
The amount of dollar reserves at the end of July is sufficient to cover approximately 3.4 times the country’s short-term external debt based on remaining maturity.
It also represents 7.2 months of import expenses for goods and payments for services and primary income.
“Conventionally, GIR is deemed adequate if it can finance at least three months’ worth of the country’s imports of goods and payments for services and primary income,” the BSP stated.
“The latest GIR level guarantees the availability of foreign currency to satisfy balance of payments financing requirements, such as for import payments and debt servicing, during extreme situations when there are no export revenues or foreign loans.”
International reserves consist of foreign assets of the BSP, primarily held as investments in foreign-issued securities, monetary gold, and foreign exchange.
These are augmented by claims against the International Monetary Fund (IMF) in the form of reserve positions within the fund and special drawing rights (SDRs).
The BSP’s foreign exchange holdings plunged by 34.3% to $826.3 million as of July from $1.26 billion at the end of June. Year-on-year, it grew by 2.1% from $809 million.
The value of the central bank’s gold reserves edged down by 0.1% to $13.78 billion from $13.8 billion as of June. Conversely, it surged by 33.7% from $10.31 billion a year prior.
As of the end of July, spot gold was down 1.5% at $3,275.92 per ounce. US gold futures settled 0.8% lower at $3,352.8, according to Reuters.
Gold generally performs well in times of economic uncertainty and a low-interest-rate environment further reinforces the appeal of the non-yielding asset.
BSP data indicated that foreign investments rose by 0.2% to $86.42 billion as of July, up from $86.26 billion a month earlier. However, it fell by 5.1% to $91.1 billion compared to the same period in 2024.
The nation’s reserve position in the IMF slightly decreased by 0.5% to $729 million from $732.4 million the prior month. Year-on-year, it increased by 1.3% from $719.9 million.
SDRs — the amount that the Philippines can access from the IMF’s reserve currency pool — remained unchanged month on month at $3.94 billion.
Meanwhile, net international reserves dropped by 0.3% to $105.7 billion at the end of July from $106 billion at the end of June.
Net international reserves refer to the gap between the GIR and reserve liabilities, which include short-term foreign debt, as well as credits and loans from the IMF.
“The decrease in GIR may stem from significant debt repayments to address maturing securities and other responsibilities,” noted Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort mentioned that the reduction in GIR was also influenced by the ongoing “Trump risk factor causing some market fluctuations globally.”
Markets have been in a wait-and-see mode amidst the US’s inconsistent tariff policies.
In an executive order signed on July 31, US President Donald J. Trump imposed a 19% tariff on many goods from five nations in the Association of Southeast Asian Nations — the Philippines, Cambodia, Malaysia, Thailand, and Indonesia. This was anticipated to be effective on Thursday (Aug. 7).
In the meantime, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. indicated that dollar reserves could trend downward in the coming months if the BSP intervenes to support the peso.
“If the BSP intervenes to prevent the US dollar from surpassing P59 and P60, we could see further depletion of our GIR,” he expressed in a Viber message.
BSP Governor Eli M. Remolona, Jr. informed Bloomberg on Tuesday that the central bank is intensifying its interventions during prolonged periods of peso weakness as part of a new strategy, gradually stepping away from daily interventions.
He mentioned that the central bank adopted a new approach to determine the extent of peso losses that necessitate stronger intervention to alleviate price pressures, Bloomberg reported.
“They aren’t particularly concerned about breaches of these levels since inflation remains quite low,” Mr. Neri added.
Inflation sharply dropped to a near six-year low of 0.9% in July, down from 1.4% in June and 4.4% a year prior, marking the fifth consecutive month that it remained below the central bank’s 2-4% target.
For the initial seven months of the year, inflation averaged 1.7%, slightly above the BSP’s 1.6% projection for 2025. — Luisa Maria Jacinta C. Jocson