By Luisa Maria Jacinta C. Jocson, A reporter
THE COUNTRY posted a balance of payments (BoP) deficit of $724 million in October as the government paid down its foreign debt, the Bangko Sentral ng Pilipinas (BSP) said.
This was a reversal of a $1.51-billion surplus last year and a $3.526-billion surfeit in September.
“The BoP deficit in October 2024 reflected the withdrawal of foreign currency by the National Government (NG) from its deposits with the BSP to meet its foreign currency debt obligations and to meet its various expenses,” the BSP statement said.
BoP summarizes national and international transactions. A deficit means more money has left the country, while a surplus means more money has come in.
The latest data from the Bureau of the Treasury (BTr) showed that NG’s outstanding debt rose to a record high of P15.89 trillion as of the end of September.
The majority (68.81%) of the debt comes from domestic sources while the rest comes from foreign creditors.
External debt rose 9.3% to P4.96 trillion at the end of September from a year ago.
Central bank data showed the BoP showed a final gross international reserve (GIR) level of $111.1 billion as of the end of October, down from $112.7 billion the previous month.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the decline, the reserve level has been above the $100-billion mark for more than a year or 13 straight months.
“It is still very high GIR, which is the second highest on record, partly due to net income from BSP’s foreign investment amid many gains in global financial markets recently with market expectations of a series of Fed rate cuts from 2024-2026,” he added.
The US Federal Reserve began its rate-cutting cycle in September with a half-percentage-point cut and delivered another quarter-percentage point cut earlier this month.
Markets expect another quarterly rate cut at their last annual meeting in December.
Data from the central bank showed that the dollar buffer is enough to cover 4.4 times the country’s short-term foreign debt based on net maturity.
It is also equal to eight months of importation of goods and payment of services and basic salary.
An adequate level of foreign exchange tests protects the economy from market volatility and is a guarantee of the country’s ability to pay debts in the event of an economic downturn.
Mr. Ricafort said that the deficit situation in October happened because of the country’s ongoing trade deficit.
The Philippines’ trade balance stood at a deficit of $5.09 billion in September, the largest in 20 months.
The country’s trade balance has been in the red for more than nine years since the $64.95 million surplus recorded in May 2015.
Mr. Ricafort also noted the volatility due to the country’s risks and market prices to the restrictive trade policies of the Trump administration.
10 MONTHS REMAINING
Meanwhile, the country’s BoP position registered a surplus of $4.393 billion in the ten-month period, up from a surplus of $3.246 billion last year.
“The surplus reflected in part the continuation of income from personal expenses, trade in services, and net foreign borrowing by NG,” the central bank said.
“Furthermore, foreign direct investment and portfolios contributed to the BoP surplus,” it added.
The latest data from the BSP showed that foreign direct investment (FDI) increased by 3.9% year-on-year to $6.07 billion in the first eight months.
Meanwhile, foreign portfolio investment inflowed $3.02 billion in the January-September period, well above the inflow of $387.24 billion last year.
“In the coming months, the BoP data could improve, thereby leading to a better GIR, partly due to the benefit of the National Government’s foreign currency borrowing from both commercial sources which will further add to the country’s BoP and GIR,” said Mr. Ricafort.
He also noted the steady growth of remittances from Filipino workers, a business process income, exports and foreign tourism receipts.
“Going forward, any improvement in the BoP data and GIR data for the coming months may still help provide a greater cushion for the peso exchange rate (against the US dollar) especially against any perceived attack, as well as help strengthen the country’s external position. ,” he added.
The BSP expects a BoP surplus of $2.3-billion at the end of the year, equivalent to 0.5% of economic output.
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