The Philippine dollar fell to its lowest level in over a year due to foreign debt defaults, a drop in global gold prices. and the central bank’s efforts to do so to support the peso during the war in the Middle East, said the Bangko Sentral ng Pilipinas (BSP).
The country’s gross international reserves (GIR) stood at $103.974 billion at the end of May, down 1.14% from the $105.177 billion it held last year, preliminary BSP data showed.
On a month-to-month basis, it was down 0.34% from $104.328 billion at the end of April.
This was the lowest GIR level seen since January 2025, when it stood at $103.271 billion.
In a statement issued late on Friday, the central bank said the National Government has defaulted on foreign debt payments during this period, which has led to a decrease in foreign currency deposits and reduced dollar reserves.
The month-on-month decline also reflected the loss of the BSP’s gold holdings amid low global gold prices, as well as its recent foreign exchange activities, it added.
The drop in dollar reserves comes as the central bank said it had moved to support the peso amid volatility caused by the ongoing Middle East war.
This happened as the safety demand for the greenback dragged the peso to a new historic low of P61 to the dollar from the P58 range before the war started in late February.
On May 29, the peso lost 10.50 centavos to end at P61.59 against the dollar from its close of P61.485 on April 30. It fell to a record low of P61.75 on May 18 and 19.
Nevertheless, the BSP noted that the current level of the country’s foreign exchange reserves continues to provide a “strong barrier to foreign exchange.”
“Despite the decline, this rate still provides a strong foreign exchange buffer, equivalent to 6.9 months of imports of goods and services. and primary income,” it added.
This is well above the three-month rate and would still pay around 3.6 times the country’s short-term external debt based on net maturity.
Dollar reserves are foreign assets of the central bank that are mainly held as investments in foreign-issued securities, foreign trade and currency gold, among others.
This is supplemented by International Monetary Fund (IMF) claims in the form of fund reserves and special drawing rights (SDRs).
Based on BSP data, its foreign currency and deposits jumped 24.31% to $583 million from $469 million at the end of April but fell 18.13% year-on-year from $712.1 million.
Meanwhile, the BSP’s foreign investment decreased by 0.19% to $79.247 billion at the end of May from $79.395 billion in the previous month and by 7.99% from $86.128 billion in the same period last year.
Its gold also fell 1.51% to $19.48 billion from $19.78 billion as of the end of April. For the year, it increased by 41.93% from $13.725 billion last year.
The Philippines’ final position at the IMF stood at $712.2 million as of May, down 1.58% from $723.6 million recorded at the end of April and 0.5% from $715.8 million last year.
Meanwhile, the country’s SDRs – or the amount the Philippines can receive from the IMF’s reserve currency basket – fell to $3.952 billion at the end of May, down 0.24% from $3.961 billion last month. Year over year, it increased by 1.46% from $3.895 billion.
A large amount of foreign exchange reserves protects a country from market volatility and ensures that it can pay off debts in the event of an economic downturn.
By the end of this year, the BSP expects foreign reserves to reach $111 billion, surpassing $110.8 billion. – Katherine K. Chan
