Debt repayments push the balance of payments back into deficit

The country’s balance of payments (BOP) position returned to deficit in November, Bangko Sentral ng Pilipinas (BSP) reported late on Monday.

The balance of payments – a measure of a country’s transactions with the rest of the world – registered a deficit of $756 million, more than six times the $123 million recorded a year ago.

The monthly deficit of the balance of payments this year was registered nine times. A high of $2.34 billion in September was followed by a surplus of 711 million pesos the following month.

“The balance of payments deficit in November 2022 reflected an outflow of funds arising mainly from the national government’s payments on its foreign currency debt obligations and the net foreign exchange operations of Bangko Sentral ng Pilipinas,” the central bank said in a statement.

Since the beginning of the year, the balance of payments deficit has widened to a new record of $7.9 billion, a change from last year’s $353 million surplus.

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“Based on preliminary data, this cumulative balance of payments deficit was driven by a widening merchandise trade deficit as merchandise imports continued to exceed merchandise exports amid rising global commodity prices and a resumption of domestic economic activity,” BSP said in a statement.

Meanwhile, the country’s gross international reserves (GIR) rose to $95.1 billion last month from $94.0 billion in October.

“[T]The latest level of GIR represents a more than adequate buffer of external liquidity, equivalent to 7.2 months of imports of goods and payments for services and primary income,” the BSP said in a statement.

It is also about 5.8 times the country’s short-term external debt on an original maturity basis and 3.8 times on a residual maturity basis, the central bank added.

Comment required, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said strong dollar inflows likely supported recent balance of payments and GIR levels.

“In the coming months, especially in December, the balance of payments data may improve further due to the expected seasonal increase in structural inflows into the country in terms of a seasonal increase in OFW (Overseas Filipino Workers) remittances, BPO (Business Process Outsourcing) revenues, exports . income, income from foreign tourism [and] POGO (Philippine Offshore Gaming Operators) revenues, among other things, due to the holiday season culminating in December,” he added.