MANILA, Philippines – The introduction of more dollars in the Philippine economy due to government loans and the central bank’s overseas investments caused a surplus in currency flows in July and reduced the operating deficit in the first seven months of the year.
In a statement, Bangko Sentral ng Pilipinas (BSP) said the country’s total balance of payments position was $ 642 million in July 2021, higher than the $ 8 million record recorded in the same month in 2020.
“The surplus on dollar flows for the last month mainly reflected the national government’s net foreign currency deposits with BSP and BSP’s income from its investments abroad,” BSP said. It added that these were partially offset by the government’s payments on foreign currency debt obligations and BSP’s net foreign exchange operations.
The surplus in July reduced the cumulative balance of payments deficit in the period January to July 2021 to $ 1.3 billion from a deficit of $ 1.94 billion in the first semester of the year.
But the current balance of payments level from year to date is a reversal from the $ 4.12 billion surplus recorded in the same period a year ago.
“Based on preliminary data, this is cumulative [dollar flows] the deficit was partly attributed to a larger trade deficit on goods, ”said BSP.
Balance of payments represents net flows of foreign currency to and from an economy due to income from abroad, whether payments for product exports or services, investment inflows or outflows due to imports or repatriation of capital, among others.
Sustained current account surpluses tend to strengthen the local currency against the US dollar, while persistent deficits have the opposite effect.
According to the BSP, the latest balance of payments position reflects an increase in final gross national reserves to $ 107.15 billion at the end of July 2021 from $ 105.76 billion at the end of June 2021.
The latest reserve level represents a more than adequate external liquidity buffer equivalent to 12.2 months’ worth of imports of goods and payments of services and primary income, BSP said.
It is also about 7.7 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity, it explained.
BSP Governor Benjamin Diokno on Wednesday (August 25) said he supported the International Monetary Fund’s decision to allocate more liquidity to the Philippines to increase the country’s already significant foreign exchange reserves.
“We confirm that the Philippines’ share in the allotment of special drawing rights of 1.95 billion SDRs was credited to the country’s account on August 23, 2021,” he said of the amount worth $ 2.7 billion at the current exchange rate . “We expect this to result in an increase in the country’s gross international reserves.”
“The IMF advises Member State authorities that the SDR allocation can be used to increase foreign exchange reserves and reduce debt dependence, create space for countries to step up their response to the crisis and support economic reforms,” Diokno said.
“IMF member countries can exchange their SDRs for hard currencies with other IMF members. The newly allocated SDRs are reflected in the gross international reserves until the national government determines its application, ”he said.
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