Jul 052013

MANILA, Philippines – The country’s foreign exchange reserves dropped to its lowest level in 10 months last June after the central bank’s gold holdings plummeted in value, the Bangko Sentral ng Pilipinas (BSP) reported on Friday. 

Gross international reserves (GIR) — buffer funds in times of external shocks— fell to $81.64 billion last month, preliminary data showed. It marked the third straight month of decline since GIR peaked at $85.273 billion in January.

The latest tally was also the lowest level for reserves— one of the drivers tagged by credit rating agencies for their upgrades— since August 2012 when they hit $80.728 billion. 

Despite the decrease, BSP Governor Amando Tetangco, Jr. said in a statement that reserves remain sufficient to cover 11.8 months worth of imports of goods and services. 

They are also equivalent to 8.3 times the country’s short-term foreign debt based on original maturity, and six times based on residual maturity. The BSP expects GIR to hit $87 billion this year.

“The slight decline in reserves was due mainly to revaluation adjustments on the BSP’s gold holdings arising from the decrease in the price of gold in the international market…,” Tetangco said.

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According to official figures, gold holdings decreased 11.33 percent versus the previous month to $7.663 billion, the lowest level in nearly two years. It was the single biggest drag to reserves last month.

“These outflows were partially offset by inflows from foreign exchange operations of the BSP, foreign currency deposits by the Treasurer of the Philippines and income from investments abroad,” Tetangco explained.

Reserves invested abroad— which corners bulk of the GIR— inched up to $71.048 billion in June from $70.601 billion a month ago, data showed.

Those invested with the International Monetary Fund also rose to $540.16 million, while reserves in the form of special drawing rights— the IMF’s currency— remained at its level of $1.257 billion.

Meanwhile, despite the peso’s weakness against the dollar last month, the BSP boosted the GIR’s foreign exchange component— a pool of funds composed of major currencies such as the US dollar and the Japanese yen. 

Foreign exchange holdings rose by a fifth to $1.132 billion last month, data showed. The BSP usually increases this segment by buying dollars from the market to temper the peso’s rise.

However, in the past month, the local unit, Asia’s second best performer, slumped versus the greenback to as much as the 44-level due to concerns abroad. The peso closed up three centavos at 43.40 to a dollar on Friday.

The BSP said net international reserves— GIR minus short-term liabilities— also stood at $81.6 billion in June, data showed.

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